Premiums Could Increase as Much As 774% if Subsidies Ruled Illegal

Premiums for plans purchased through the federal exchange could increase by as much as 774% if the Supreme Court strikes down the Affordable Care Act's subsidies to help U.S. residents purchase coverage through HealthCare.gov, according to an Avalere Health study published Thursday, The Hill reports (Ferris, The Hill, 2/26).

Background

The subsidies have been challenged in the upcoming Supreme Court case King v. Burwell. At issue in the case is that while the ACA says subsidies are available to help certain U.S. residents purchase coverage offered "through an exchange established by the State," a May 2012 IRS rule allows the subsidies to be used in an exchange administered either by a state or the federal government. The high court will hear oral arguments in the case on Wednesday and will release a decision by the end of June.

If the court strikes down the federal exchange subsidies, the ruling would eliminate about $28.8 billion in subsidies to 9.3 million individuals in 34 states in 2016, according to an Urban Institute analysis (California Healthline, 2/24).

Study Details

The study is based on HHS data on the ACA's second open enrollment period (Avalere Health study, 2/26).

According to the study, premiums in states using the federal exchange would increase by an average of 255% if the subsidies are ruled to be illegal. Meanwhile, nine states would see premium increases of more than 300%, including Florida and North Carolina. Alaska and Mississippi would see the largest increases, at about 449% and 774% respectively.

Avalere CEO Dan Mendelson wrote, "The federal exchange generally serves low-income populations in [Republican-controlled] states, so that's where the premium increases would be concentrated. If King prevails, we expect to see virtually all stakeholders aggressively seeking alternatives to ensure continuity of care" (Ferris, The Hill, 2/26).

GOP Lawmakers Press Burwell on Alleged Subsidies Backup Plan

In related news, members of the House Energy and Commerce Subcommittee on Health during a hearing on Thursday pressed HHS Secretary Sylvia Mathews Burwell for details on HHS' alleged backup plan for the Affordable Care Act's subsidies to help U.S. residents purchase coverage through the federal exchange if the Supreme Court rules they are illegal, the Washington Times reports (Howell, Washington Times, 2/26).

In a letter to Congress on Tuesday, Burwell said the Obama administration has no contingency plan if the high court strikes down the subsidies. In the letter, she wrote that the administration "know[s] 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" a ruling invalidating the subsidies (Pear, New York Times, 2/24).