6 things to expect if SCOTUS kills subsidies
The Supreme Court is expected to make a ruling on the King v. Burwell case any day now.
The case ultimately hinges on just four words — “established by the state” — as it calls into question the legality of federal exchanges. While PPACA challengers say that phrase limits the tax credits to the 16 states that have set up their own exchanges, the Obama administration has defended an IRS rule that interpreted the law as allowing subsidies nationwide.
Regardless, it’s anyone’s guess what the Court will do. But here are 6 things that would happen should SCOTUS gut the subsidies under the Patient Protection and Affordable Care Act.
1. Millions will lose credit, and maybe coverage.
If the government loses in King v. Burwell, insurance subsidies that PPACA makes available will vanish and an estimated 9.6 million people stand to lose coverage, according to reports. That figure would equate to 70 percent of enrollment in the federal exchanges.
Researchers from the think tank the RAND Corp. said that if the Supreme Court declares the subsidies illegal in the federal exchange, the number of U.S. residents with coverage purchased on the individual market would decline from 13.7 million to 4.1 million. That’s because, they said, the ruling would have a domino effect on consumers: First, those losing subsidies would drop their coverage, decreasing the number of people in the insurance pool. That would cause soaring premiums, by nearly 50 percent, which would cause many more remaining consumers to drop their coverage.
2. Exploding premiums.
There’s been a lot of numbers thrown around as to just how much premiums could increase pending the case outcome.
But the most recent figures, from consulting firm Avalere Health, is perhaps the most dire warning yet. It said that 7.5 million Americans could face an average premium increase of 255 percent this year should the Court toss out the subsidies. And some could face an increase of as much as 779 percent.
Avalere said 87 percent of federal exchange customers receive a subsidy. Therefore, the firm said killing the subsidies would cause “average monthly premium contributions for enrollees” to potentially increase “between 122 percent and 774 percent, depending on the state.” Residents in Alaska and Mississippi would see the highest percentage increases in their premium contributions, if the court rules in favor of the plaintiffs.
“The federal exchange generally serves low-income populations in red states, so that’s where the premium increases would be concentrated,” said Avalere CEO Dan Mendelson. “If King prevails, we expect to see virtually all stakeholders aggressively seeking alternatives to ensure continuity of care.”
Premiums in the individual market are also expected to surge, as a result.
3. Some states will get hit especially hard.
Residents in Florida, Texas, North Carolina, Georgia and Pennsylvania will lose more subsidies than any other states with federal subsidies. According to the Kaiser Family Foundation, the highest increase per person would occur in Mississippi, with premium increases estimated at a whopping 650 percent higher than the current figure. Florida will lose the largest gross amount — $389 million in subsidies — with Texas a distant No. 2 at $205 million.
4. Most Americans wouldn’t be happy.
An adverse ruling in the subsidies case wouldn’t appease most Americans: Poll after poll has discovered the public wants the Supreme Court to preserve the subsidies in all 50 states.
The latest poll, from ABC News/Washington Post, finds that 55 percent said the justices should not block subsidies from Americans enrolled through the federal exchange. Thirty-eight percent said they should.
That’s despite the fact that the same poll shows they generally disapprove of PPACA as a whole: Respondents said they oppose the law by a margin of 54 to 39 percent.
5. There will be lots of scrambling to come up with a plan.
Though there has been some talk about a backup plan should the federal subsidies get killed, it’s important to note: There is no clear plan, either by the administration or the GOP, should the court rule against the federal government. However, some states have talked contingency plans.
Pennsylvania Governor Tom Wolf said last month that Pennsylvania has a contingency plan to create a state-run exchange if the Supreme Court rules that subsidies cannot be provided via Healthcare.gov. Pennsylvania is one of 37 states currently using the federal exchange.
Some believe that the overall plan would be to temporarily extend Obamacare subsidies while considering next steps.
Voters, according to polls, want Congress to immediately step in to come up with a plan should SCOTUS gut the subsidies.
6. Other PPACA requirements may be undermined.
Both the individual and employer mandates would be undermined if the subsidies are eliminated.
Without subsidies, the employer mandate would suffer, because employers can only be fined if their uninsured workers go to an exchange and get a subsidy.
“Loss of premium subsidies in federally run exchanges would mean that many exchange consumers will be exempt from the individual mandate,” said Elizabeth Carpenter, director at Avalere. “Moreover, because the employer mandate is tied to employees claiming a premium subsidy, it would also undermine employer responsibility requirements in those areas.”