9.6M Could Lose Coverage if Federal Exchange Subsidies End
The number of U.S. residents with health insurance could drop by about 9.6 million if the Supreme Court deems illegal the subsidies to help individuals purchase coverage through the federal exchange, according to a new RAND Corporation study, The Hill reports (Viebeck, The Hill, 1/8).
The Supreme Court in December 2014 announced that it will hear oral arguments in King v. Burwell on March 4, meaning the court likely will release a decision on the case by the end of June (California Healthline, 12/23/14). A May 2012 IRS rule allows the subsidies to be used in an exchange administered either by a state or the federal government. The suit's plaintiffs argued that the IRS rule should be invalidated because it contradicts what Congress originally wrote in the ACA.
The 4th U.S. Circuit Court of Appeals ruled to uphold the subsidies. Plaintiffs in the case then asked the Supreme Court to review the issue (California Healthline, 11/10/14).
Ending Tax Credits 'Would Cause Significant Instability'
The RAND researchers wrote that if the high 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.
The researchers explained that the drop would be caused by a series of events. First, those losing subsidies likely would drop coverage, which would decrease the number of people in the insurance pool. In turn, premiums would rise -- by as much as 50%, according to the researchers' estimates -- for those who remain in the individual market, regardless of where they obtained coverage. The higher premiums would then cause more individuals to drop coverage.
Christine Eibner, senior economist at RAND and a study co-author, said that a decision declaring the subsidies illegal "would cause significant instability and threaten the viability of the individual health insurance market in the states involved." She added the "analysis confirms just how much the subsidies are an essential component to the functioning of the ACA-compliant individual market."
The RAND study follows an Urban Institute analysis last year that found a ruling to end the subsidies would cause 7.3 million low- and middle-income U.S. residents to miss out on $36 billion to help them purchase coverage in 2016 (Demko, Modern Healthcare, 1/8).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.