On March 4, 2015, the United States Supreme Court heard oral arguments in King v. Burwell regarding the Affordable Care Act (ACA). This case addresses whether the federal tax subsidies that help Americans afford health insurance can apply in the 34 state Marketplaces that are facilitated by the federal Marketplace at Healthcare.gov. If the Court finds against the Obama administration and determines that subsidies can only be applied in state Marketplaces, the effects would be immediate and far-reaching.
Effect of a Ruling Against The ACA in King v Burwell
Supreme Court rulings generally take effect 25 days after they are issued, meaning that Americans in 34 states would have less than a month of tax subsidies before they had to pay their full insurance premium themselves. Some observers think the subsidies would end much sooner than that – as early as July 1 in response to a June ruling.
The result would be that more than 6.5 million Americans would find themselves paying an average of $268 per month more than they were paying before, which could lead to widespread policy cancellation and a dramatic increase in uninsured Americans. The 34 states that currently use the federal Marketplace could also find themselves pressured to quickly create a state Marketplace to restore the subsidies. If states don’t make this move, the insurance market could quickly become destabilized as coverage requirements – like the requirement to cover preexisting conditions – clash with a lower number of insured healthy Americans whose premiums help cover that cost.
In fact, destabilization of the health insurance industry is the most likely and most destructive effect the ruling would have. Some states would continue to have subsidized care and other states would not, creating a two-tiered insurance system that would not work for national health insurance carriers and would cause patent unfairness in American health coverage.
In addition, states that have tried guaranteed access to health insurance with no requirement that individuals obtain coverage have faced increasing premiums and shrinking enrollment over time as fewer healthy Americans can afford coverage. The ACA’s requirement to purchase coverage only applies to those with affordable insurance options available to them. Without premium subsidies, many Americans would be exempt from the mandate and as a result, guaranteed access without a coverage requirement and subsidies to make coverage affordable would actually increase the number of uninsured Americans.
Alternative Solutions to Tax Subsidies
Opponents of the ACA would be happy to see the law collapse under unbalanced subsidies and rising premiums. However, there are currently no workable alternatives, although many Republicans in Congress are exploring ideas. Some conservatives would be willing to temporarily extend the current subsidies in all states until a solution is found, but others are strongly set on exiting ObamaCare as quickly as possible.
With little consensus among ACA opponents, it could be very difficult for an alternative to ObamaCare to be determined and implemented before widespread negative effects of the Supreme Court ruling occurred.
This is certainly a tense time for the Obama administration, insurance providers, and millions of Americans who use subsidies for health insurance. Even those who don’t use subsidies aren’t sure what will happen to insurance premiums if the Court rules against the ACA. It’s a matter of wait-and-see for everyone at this point.
To learn more about the King v. Burwell case, read Oral Arguments Made Before Supreme Court Against ACA.