This is a post I’ve been hoping to write. And now I can because, as you’ve undoubtedly read, the Supreme Court majority has preserved the subsidies low and moderate- income people have been getting to help them afford health insurance purchased on the federally-operated exchange.
You may also have read some of the dire warnings of what would happen if the Court had ruled otherwise. Perhaps not as many as I’ve ferreted out, however. So I’ll begin with them. Then I’ll briefly highlight a less publicized warning of yet further harm, presumably averted.
Nearly Three-Quarters of Subsidies Saved
As you probably know, plaintiffs contended that the federal government couldn’t subsidize the costs of health insurance purchased on the exchange it created for people in the 34 states that wouldn’t — or in some cases, decided they couldn’t — create their own exchanges.
Say five instead of three Supreme Court members had agreed.
About 6.4 million people would have lost the tax credits that serve as subsidies, according to the latest enrollment figures. That’s roughly 74% of all those who receive them.
Their subsidies average $272 a month. So if premiums stayed the same, they’d have had to come up with an additional $3,264 a year. But premiums wouldn’t have stayed anywhere near the same. They’d have increased by an average of 35% next year, according to Urban Institute analyses.
Basic market forces would have driven a so-called death spiral. First, relatively young, healthy people would have decided to forgo health insurance rather than pay what their subsidies had covered. Insurance companies then would have faced higher per-customer healthcare costs. So they’d have jacked up their premiums to compensate.
Which, of course, would have led to more younger, healthier dropouts. Which would have led to … Well, you see where this is going. Premiums would ultimately have increased by 47%, the RAND Corporation concluded — unless states belatedly set up their own exchanges.
Some might have given it a shot. But few, if any could have gotten their own exchanges up and running by next year.
Some surely wouldn’t have tried. We’ve still got 18 states that refuse to expand their Medicaid programs, even though the federal government would initially cover all the healthcare costs of newly-eligible beneficiaries — and virtually all so long as that part of the ACA remains intact.
Most of these states, as well as others were in a wait-and-see mode. Some clearly looked to Congress to let them do whatever they fancied. And indeed, the House Republicans’ latest block grant plan would have. Not a happy prospect, for various reasons.
Greatest Reprieve for Poor and Near-Poor
An adverse ruling wouldn’t have affected the very poorest Americans. They never had a chance to buy subsidized health insurance on an exchange because their household incomes put them below the federal poverty line.
Some are eligible for Medicaid, even in the recalcitrant states. Texas, for example, will cover parents in three-person families with annual incomes at or below 19% of the FPL — currently $3,817. No Medicaid for even the poorest childless adults — nor in any other non-expansion state except Wisconsin.
But the near-poor apparently took advantage of the exchange option. We see, for example, that 94.5% of Mississippi residents enrolled benefit from subsidies averaging $351 a month.
More generally, individuals and families hovering just above the FPL would obviously have been the least able to pay for unsubsidized premiums — and full out-of-pocket costs like copays too. For those Mississippi folks, the average premium hike alone would have been 650%.
Hospitals Saved From Large Losses
Meanwhile, hospitals would have faced bigger cost crunches because they’d have been obliged to provide more emergency care for uninsured people. Through their major associations, they agreed to a lower compensation rate for the uninsured on the assumption there’d be fewer.
A ruling for plaintiffs would have blown another hole in the assumption. (The earlier ruling that made Medicaid expansion optional was the first.)
But hospitals are — and would still have been — stuck with the compensation rate. Their losses due to newly-uninsured patients would have totaled $3.8 billion next year, the Urban Institute estimates.
Next Step in Gutting the Affordable Care Act Short-Circuited
A victory for plaintiffs could well have prompted another round of litigation to dismantle the ACA — or, as one of the strategists put it, to kill “the bastard … as a matter of political hygiene.”
In this scenario, the anti-ACA funders and their allies would probably have called on the courts to invalidate federal funding for Medicaid and the Children’s Health Insurance Program in those same 34 states where residents lost their subsidies.
A bit of background to understand how they’d go at it. The case before the Supreme Court hinged on what the ACA means when it refers to “an exchange established by the state” — or alternatively, whether the use of that term was a drafting glitch, clearly at odds with the intent of the law and other provisions in it.
Well, two wholly separate provisions use the same term, as Modern Healthcare reports. The more consequential conditions federal Medicaid/CHIP funding on states’ ensuring coordination between these programs and “an exchange established by the state.”
A ruling for plaintiffs in the case just decided wouldn’t automatically have denied Medicaid/CHIP funding to the 34 states without their own exchanges. But would it have given ACA opponents a good shot at another challenge affordable health insurance for poor and near-poor Americans? You betcha.