If when the Supreme Court rules later this month on King v. Burwell that subsidies cannot be issued on the federal health care exchange, 6.4 million people would lose subsidies collectively worth $1.7 billion per month, a Kaiser Family Foundation analysis finds.
A decision in favor of the plaintiff would affect Florida residents the most, where 1.3 million people would lose subsidies worth $389 million a month. Texas would be the second most affected, with 832,000 residents losing a total of $206 million per month. The calculations are based on recent data from the Department of Health and Human Services.
Nationwide, if the subsides are ruled illegal, the percent increase in average premium would be 287%, with the highest increase in Mississippi (650%). The premiums would also increase substantially in Alaska and Utah (520% each). In Alaska, those receiving a subsidy pay approximately $100 a month for coverage. Without a subsidy, that would jump to more than $600 a month.
In those states, premiums are already some of the highest in the nation and Mississippis subsides are particularly high due to its very low income population, explains Cynthia Cox, associate director of Kaisers program for the study of health reform and private insurance in Washington.
If the subsides are ruled illegal, it is possible the Supreme Court will issue a stay, which would allow Congress or the states time to come up with a plan, Cox says. But more likely is subsides would end within a few weeks and the immediate effect would be huge premium increases for people who rely on subsides in 34 states, she says.
With inaction by Congress or the states, that would then trickle down and have a serious effect on the market, she says, as only the sickest would enroll in coverage.
The risk pool on and off exchange for individual coverage is the same, so even if insurance is purchased from a broker or insurer, premiums would go up significantly, Cox says.
A Plan B?
Bracing for a possible end of the federal subsidies, leading Republicans are busy preparing a legislative response. Senate Finance Committee Chairman Orrin G. Hatch (R-Utah), Sen. Richard Burr (R-N.C.) and House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) reportedly have crafted a plan that would cap tax credits at up to 300% of the federal poverty level from the current 100% to 400% range.
Other highlights of the expected legislation include limiting tax exclusions on employer-provided health insurance to $12,000 for individual coverage and $30,000 for family coverage, dismantling Medicaid expansion under the ACA in favor of state grants and allowing consumers to purchase health plans across state lines, according to The Washington Times.
Additional reporting by Bruce Shutan
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