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If the Supreme Court topples Obamacare subsidies, the insurance industry could be rattled anew, and millions of Americans could face the loss of affordable health insurance.
According to a recent report from the RAND Corporation, a nonprofit institution that helps improve policy and decision-making through research and analysis, enrollment in the ACA-compliant individual market, including plans in the marketplaces that comply with Affordable Care Act regulations, would decline by 9.6 million, or 70 percent, in federal-facilitated marketplace (FFM) states. Healthy customers may drop coverage and leave a risk pool of sicker people with higher medical costs. Insurers would exit the marketplace, resulting in a less competitive industry.
Researchers at the Washington, D.C.-based think tank Urban Institute estimate 7.3 million individuals in 34 states would lose access to $36.1 billion in tax credits in 2016 if the court rules in favor of King v. Burwell's plaintiffs. The plaintiffs say that subsidies making Obamacare plans affordable are unlawful for residents in the 34 states that haven’t designed exchanges of their own and instead use federally-operated marketplaces to buy health insurance.
Such a ruling, health experts claim, could batter Obamacare, which depends on enough healthy Americans enrolling in plans made affordable by these subsidies.
“If the subsidies were overturned and this situation was not fixed, there would be dramatic increases in premiums,” says Harold Pollack, Ph.D., Helen Ross Professor at the School of Social Service Administration at the University of Chicago, where he is also an executive committee member of the Center for Health Administration Studies (CHAS). “Healthy people would stop buying, partly because they wouldn’t have to buy anymore, because they would be no longer subject to the individual mandate (penalty for not having health insurance). Premiums would skyrocket due to what’s sometimes called the ‘adverse selection death spiral.’”
Pollack says that the intent of the law all along was that everyone would get these subsidies, and that what’s happening now is purely a question of statutory interpretation. “Congress could pass basically a one-paragraph law to fix this,” he says. “They don’t have the political consensus to do that. But what they have to do is completely straightforward: They just have to clean up some language.”
He adds that that state legislators could set up their own exchanges, but that would take time. The Obama administration could also streamline the set-up process, he states, and mandate a period of time that would keep the subsidies legal so that people could needing them for affordability could have health insurance until the situation levels out and is under control.
In nine of the 34 states that use the federally-run marketplaces, legislation is pending to create state exchanges that would allow enrollees to benefit from subsidies. Legislators have rushed to coordinate those measures, but they are unlikely to be operating by June, when the court is expected to rule.
Republicans say they have a strategy to provide affordable coverage to those whose subsidies would vanish. "Millions of Americans may lose these subsidies if the court finds that the administration acted illegally. If that occurs, Republicans have a plan to protect Americans harmed by the administration's actions," wrote Sen. Orrin Hatch, the Republican chairman of the Senate Finance Committee, in the March 1, 2015 edition of The Washington Post. He said his proposal would let people keep their current insurance for a "transitional period" if the court ruling causes premium prices to soar.
“The best legal and health policy minds in the country are spending incredible amounts of time on this,” says Pollack.
Consumers are best served, he explains, by a government, insurance industry and providers who work cooperatively to resolve issues that will inevitably surface, such as King v. Burwell. “There’s the interest group politics of health reform. There’s the partisan politics of health reform. There’s the ideological politics of health reform,” he states. “The interest group politics—the Obama administration, the insurance industry, the providers—are really complicated. But now the law has passed. All these groups have a common interest in implementing health reform in a way that accommodates everyone’s real interests. What’s been surprising and dismaying about the post-enactment of health reform is that we have not been able to get to the point where the different constituencies can actually negotiate with each other to work things out. The insurance industry has a lot of really important skills to make this work. The insurance industry and the Obama administration has to work together to accomplish these complicated things. We need to get to the point where we can actually do joint problem-solving. The insurance industry and health care providers and the patients—really, everybody—would be deeply harmed if this case came down in favor of the plaintiffs. It stops us from doing the work we need to be doing.”