John Roberts might not be smiling for long.
The Supreme Court hears arguments on Wednesday, March 4 in
King v. Burwell, the case that will determine if people buying health insurance on the federal exchange should be able to receive federal subsidies. Setting aside the serious
legal deficiencies in
the case, deficiencies which would have caused non-activist judges to toss it well before now, what happens if the court decides wrongly this time? A lot, and none of it good.
Here's the Kaiser Family Foundation's Larry Levitt and Gary Claxton, leading experts on the law and on America's health system.
The immediate effect of a Court decision in favor of the plaintiff would be to cut off subsidies in affected states, which could happen within a month of the decision. Currently, in 34 states the federal government is operating the health insurance marketplace, including 7 states where the state is performing some functions. Fourteen states are fully operating state-based marketplaces. And, an additional 3 states—Oregon, New Mexico, and Nevada—are approved as state-based marketplaces but are using healthcare.gov to handle subsidy eligibility and enrollment. These 3 states, which are referred to as Federally-supported State-based Marketplaces, could potentially continue to provide subsidies. In the 34 federal marketplace states, 7.5 million people had signed up for coverage for 2015 as of mid-February and qualified for a subsidy. That figure is expected to ramp up significantly in the next year, assuming the Court does not invalidate the subsidies.
People receiving subsidies make up 87% of those who have signed up for coverage for 2015 in states using the federal marketplace. For the vast majority of them, coverage would be unaffordable without the subsidies. The subsidies average $268 monthly per person and cover 72% of the premium, leaving enrollees to pay for 28% of the premium (or an average of $105 per month). With the subsidies eliminated, those who had been receiving them would face an increase in their out-of-pocket premiums averaging 256%.
Two hundred and fifty-six percent premium hikes. That's at the outset, before all of the people who just can't afford to pay 256 percent more dropped their coverage. When that happens, the people who will remain in the system will be the sickest people, the most expensive people because insurance companies will still be required to cover them. But covering them will be increasingly expensive, so they'll have to charge even more. That means that even the 13 percent of people on the exchange now who can afford insurance without subsidies might not be able to afford them in the future. So more healthy people would drop out, and there's your death spiral. That's if there are any insurers left in the Obamacare marketplace. They aren't mandated to participate, and could well decide to drop out when they start losing healthy customers and profits.
The administration doesn't have any administrative fix options. Republican state officials are largely unconcerned that millions of their constituents are going to be booted off of their health insurance. Congressional Republicans are completely adrift when it comes to a solution.