In about a month, the U.S. Supreme Court will decide whether or not its legal to use subsidies to purchase health insurance under the Affordable Care Act in states using the federally facilitated marketplace. Since oral arguments were heard March 4 in King v. Burwell, theres been much speculation on the outcome and what will happen should the court rule against tax credits.
And the answer? Depends who you ask.
For former Congressional Budget Office director Douglas Holtz-Eakin, eliminating subsidies would have economic benefits. A ruling in favor of the plaintiffs would exempt millions from the individual mandate, granting those families a reprieve from the tax that will average $1,200 this year, according to the American Action Forum, a conservative think tank.
Employers would benefit, too, Holtz-Eakin says. The employer mandate would essentially be null and void, which would encourage employers to increases employees wages and hours, according Holtz-Eakin, AAF president, and health policy counsel Brittany La Couture.
About 7.7 million people would lose their subsidies if the high court rules in favor of the plaintiffs, four Virginia residents. Thats 87% of those who purchased a plan on the federal exchange, according to Healthcare.gov CEO Kevin Counihan.
That 87% represents the number of individuals who qualified for an average tax credit of $263 per month. With that financial assistance, more than half (55%) paid $100 or less per month for health insurance.
A ruling against subsidies doesnt mean all 7.7 million will become uninsured, Holtz-Eakin says. Many individuals that lose access to a premium subsidy will likely continue to purchase insurance, either by paying a higher price for their current plan or by switching to cheaper insurance, he says.
Thats based on a 2014 McKinsey Institute survey that found 74% of those who enrolled in an ACA plan were previously insured Which indicates that these individuals would be able to purchase insurance post-King as well, Holtz-Eakin says. However, he says, qualified health plan requirements have made previously-available insurance plans unavailable or unaffordable to many, which may reduce re-uptake.
A ruling against subsidies would result in soaring premiums, which would increase between 122% and 774%, depending on the state, according to Washington-based consultancy Avalere Health. Residents in Mississippi (774%) and Alaska (449%) would see the highest increases. The number of uninsured Americans would increase by 8.2 million, according to the Urban Institute.
A win for King would impact employers and in turn affect employees. Since the employer mandate will be unenforceable, some employers may drop insurance coverage for their employees, Holtz-Eakin says.
However, because most employers offered insurance prior to the mandate taking effect, they will likely continue offering coverage, Holtz-Eakin says. Without a penalty to worry about, small and mid-size employers could increase hours for part-time workers above the 30-hour threshold, he says. These and countless other small employers may begin hiring more full-time workers.
A reduction in administrative burdens could also lead to increased wages, Holtz-Eakin says, as much as $940 per employee.
The question of whether states should step in if subsidies are ruled illegal also depends on who you ask or more accurately, who is doing the asking.
A poll from the Foundation for Government Accountability found that just 22% of voters want states to establish their own exchanges if SCOTUS rules that only states can issue subsidies to buy insurance via a public marketplace. The FGA is a group founded by Tarren Bragdon, former CEO of the think tank Maine Heritage Policy Center and a former Republican Maine legislator.
The Kaiser Family Foundation, however, found that 69% of people living in an FFM state said states should build their own marketplace if necessary. The wording of the questions in each poll could explain the discrepancy.
The FGA poll question asks, If the Supreme Court rules the IRS overstepped its authority and that Obamacare subsides are illegal in 34 states, how should the states respond?
Kaisers question asks, If the Supreme Court rules that financial help is only available to people in states with state-run marketplaces, do you think states should create their own marketplace so people could continue to access financial help or do you think states shouldnt act on this issue?
The debate over King v. Burwell is sure to continue regardless of the findings of the next survey. But its up to the Supreme Court now.
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