Supreme Court Decision Will Affect Health Costs


Any day now the Supreme Court is expected to hand down a decision in King v. Burwell. This is the most anticipated SCOTUS decision concerning ObamaCare since the Hobby Lobby decision of a year ago. The decision will likely affect health insurance premiums for millions of American.

If you’re a regular follower of this blog, you know that King v. Burwell concerns the Obama administration’s decision to grant subsidies to everyone eligible purchasing their coverage on the federal exchange. The actual wording of the statute, however, limited subsidies to those “exchanges established by the State.”

Only about 2.85 million receive their subsidy through a state established exchange. These people will be unaffected by the Court’s decision. Currently, there are about 7.7 million Americans receiving subsidies through the federal exchange. They are ones who stand to lose their subsidies if the Court disagrees with the Obama administration’s interpretation of the law.

The average tax credits for plans bought over the federal exchange cover 72% of the premiums for those eligible, according to Obama administration officials. This leaves most people with an average monthly premium of about $100. If the court finds for the plaintiff, King, then these monthly bills will rise to about $350.

Stephanie Armour, writing in The Wall Street Journal, says about 87% of those who bought a plan or were re-enrolled in the federal marketplace this year will get subsidies to lower their premium costs. Eliminating the subsidies would raise premiums on individual plans by 47% in those states. A RAND Corporation study says the individual market will fall by as much as 70% in those states if that happens. This would lead to about eight million people becoming uninsured because of the higher costs, according to that study.

Insurance subsidies

Since the law was passed, the share of Americans without health insurance dropped to 11.9% for the first quarter of 2015 from a high of 18% in the fall of 2013. These figures come from Gallup and the Healthways company, which began measuring coverage in 2008.

Not everyone is worried about such a decision by the Court. Supporters of the lawsuit say a win by the plaintiffs would free millions of Americans from the provisions of ObamaCare. As it stands now, there is a penalty for failure to purchase health insurance unless the cost exceeds 8% of your annual income. If the subsidies are eliminated, many people will fall into this category and will thus be exempt.

The new law angers many people not getting subsidies. Costs have gone up for anyone not eligible for subsidies. The average family deductible for an economical Bronze plan was $10,545; for the more expensive Silver plan it was $6,010. In 2013, before the law took full effect, the average family deductible was only $4,230.

Consumers also face higher out-of-pocket expenses for medical treatment. HealthPocket found the average coinsurance fee for inpatient hospitals services jumped to 27% of the cost on the Bronze plans; 2013 plans average just 20% for the same care.

Many people have opted out entirely. A March survey by McKinsey & Co. found that a third of consumers who were uninsured this year – and had shopped for health coverage on or off the exchanges – said they didn’t buy a plan because they couldn’t afford it. They will be subject to a penalty this year of $325 or 2% of household income, whichever is greater.

Armour says some consumers with modest incomes say that even with a subsidy, higher prices have made their health coverage costly. The loss of subsidies in many cases would make insurance even more unaffordable or beyond reach.

Spiraling Premiums

The SCOTUS decision is expected before the end of June. Legal scholars say the Court could go either way but President Obama seems to believe the decision will not be in his favor since he recently attacked the Court for even considering the issue. His attempts to intimidate the Justices are unlikely to influence a decision that has probably already been decided.

Should King prevail, the Republican controlled Congress will be responsible for quickly bringing forth an alternative plan that restores the subsidies, at least temporarily, until a better plan unfolds. This is a golden opportunity for Republicans to influence the direction of ObamaCare in the future, even before they retake the White House.

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