WASHINGTON—Deciding that the individual mandate in the health care reform law is unconstitutional while keeping the rest of the law intact would be the “worst-case scenario” of possible Supreme Court actions on the law, most industry experts agree.

“It does not put us back to where we were prior to health care reform. It puts us in a place that is much worse than that,” said James Napoli, senior counsel with Proskauer Rose L.L.P. in Washington.

He wrote an amicus brief on behalf of the Washington-based American Benefits Council suggesting that the court should strike the employer mandate if it decides the individual mandate is unconstitutional.

“It would cause employers to seriously consider whether to remain in the health care game” because “for many employers, the cost of the penalty would be less than the cost to actually provide coverage,” he said.

Moreover, “insurers may pull out of certain markets and not provide individual coverage. What does that do to the group market? Or what does it do the cost of health care in a more general sense? The employers that self-fund will still be impacted even if they're not purchasing an insured product because the cost of health care will go up. That's the negative consequence of it,” Mr. Napoli said.

“The insurance industry will just increase the cost for everyone,” said Larry Boress, president and CEO of the Midwest Business Group on Health in Chicago.

Of eight states that enacted guaranteed issue and community rating without an individual mandate, “three went into the ditch and only five were left standing, but they are limping along,” said Paul Keckley, executive director of the Deloitte Center for Health Solutions based in Washington.

Indeed, during oral arguments, Solicitor General Donald B. Verrilli Jr. told the court that when community rating and guaranteed issue were implemented in New Jersey, rates soared and the number of individuals covered plummeted from 180,000 to 80,000. “In Kentucky, virtually every insurer left the market,” he added.

Ed Haislmaier, senior research fellow in the Center for Health Policy Studies at the Heritage Foundation, predicts that if PPACA is allowed to stand without the individual mandate “the whole thing goes south very quickly.”