Originally posted to BenefitsPro
FEB 27, 2015 | BY KATHRYN MAYER
Obamacare is back at the Supreme Court. On March 4, justices will begin hearing oral arguments on King vs. Burwell, a case that calls into question the legality of the federal subsidies under the Patient Protection and Affordable Care Act.
Here are some basics to know about the case and what it means for the industry, consumers and the law in general.
1. Millions could lose coverage.
In short, there’s a lot at stake.
Researchers from think tank the RAND Corp. concluded that nearly 10 million could lose health coverage if the Supreme Court rules that federal exchange subsidies under the Patient Protection and Affordable Care Act are invalid. The 9.6 million figure would equate to 70 percent of enrollment in the federal exchanges.
RAND researchers said that if the Supreme Court declares the subsidies illegal in the federal exchange, the number of U.S. residents with coverage purchased on the individual market would decline from 13.7 million to 4.1 million. That’s because, they said, the ruling would have a domino effect on consumers: First, those losing subsidies would drop their coverage, decreasing the number of people in the insurance pool. That would cause soaring premiums, by nearly 50 percent, which would cause many more remaining consumers to drop their coverage.
Kaiser Family Foundation researchers in November similarly estimated that 13 million Americans could lose financial assistance, with more than half living in five states: Florida, Texas, North Carolina, Georgia and Pennsylvania.
2. Crushing premium increases may happen.
There’s been a lot of numbers thrown around as to just how much premiums could increase pending the case outcome.
But the most recent figures, from consulting firm Avalere Health, is perhaps the most dire warning yet. It said that 7.5 million Americans could face an average premium increase of 255 percent this year should the Court toss out the subsidies. And some could face an increase as much as 779 percent.
Avalere said 87 percent of federal exchange customers receive a subsidy. Therefore, the firm said killing the subsidies would cause “average monthly premium contributions for enrollees” to potentially increase “between 122 percent and 774 percent, depending on the state.” Residents in Alaska and Mississippi would see the highest percentage increases in their premium contributions, if the court rules in favor of the plaintiffs.
“The federal exchange generally serves low-income populations in red states, so that’s where the premium increases would be concentrated,” said Avalere CEO Dan Mendelson. “If King prevails, we expect to see virtually all stakeholders aggressively seeking alternatives to ensure continuity of care.”
3. The public supports the subsidies.
Public support is different this time around. Though the public was very divided on their desired outcome when the constitutionality of Obamacare was challenged back in 2012, there is more of a consensus in the subsidies case.
Numerous polls have found that the vast public majority, regardless of political affiliation, want subsidies under Obamacare to survive the upcoming Supreme Court case.
One such poll, by the Kaiser Family Foundation, found that the vast majority favored a new federal law offering the subsidies to everyone regardless of the state they live in should the Court strike down the subsidies. And four out of 10 self-identifying Republicans said they were in favor of such a law.
4. Other PPACA requirements may be undermined.
As many others have already, Avalere Health pointed out that killing the subsidies could undermine the requirements of the law.
“Loss of premium subsidies in federally run exchanges would mean that many exchange consumers will be exempt from the individual mandate,” said Elizabeth Carpenter, director at Avalere. “Moreover, because the employer mandate is tied to employees claiming a premium subsidy, it would also undermine employer responsibility requirements in those areas.”
4. There is no backup plan.
The Obama administration said this week that there is no backup plan for Obamacare should the Court strike down the subsidies.
HHS Secretary Sylvia Mathews Burwell wrote in a letter to Congress on Feb. 24 that she is instead focused on open enrollment and implementing the law instead of thinking about the Supreme Court outcome.
“We know of no administrative actions that could, and therefore we have no plans that would, undo the massive damage to our health care system that would be caused by an adverse decision,” Burwell wrote.
“We are confident that we will prevail because the text and structure of the Affordable Care Act demonstrates that citizens in every state would be entitled to tax credits, regardless of whether they purchased their insurance on a federal or state marketplace,” Burwell wrote.
However, some congressional Republicans — including Sen. Orrin Hatch, R-Utah, and Rep. Paul Ryan, R-Wisconsin — say they are working on contingency plans, though they have not yet revealed them.
