The health care case: Fear and loathing at the Supreme Court | McClatchy Washington Bureau

Claudette Newsome of Houston knows the peril and pain of life without health insurance.

When her husband, Michael, was diagnosed with a deadly sarcoma in 2007, his lost income and lack of quality health insurance forced the family into bankruptcy before he died in 2010.

“We lost everything,” Claudette Newsome recalled. “Home, bank account, cars. How we lived was through family and friends raising money. . . . It was a tough haul for him and myself, because if we had health insurance, I don’t believe we would have went through all that.”

A self-employed marketing consultant, Newsome, 42, and her two daughters now have the security of health coverage, because federal tax credits under the Affordable Care Act pay $375 toward their monthly $558 premiums.

But that might change in the coming months.

On Wednesday, the U.S. Supreme Court will hear oral arguments in a case that might deny tax credits next year to Newsome and an estimated 9.3 million people in 34 states that use the federal health insurance marketplace at HealthCare.gov.

Roughly two-thirds of them, or 6.3 million, probably would become uninsured in 2016, according to estimates by the Urban Institute, a centrist research center.

Plaintiffs in the King v. Burwell case argue that the Affordable Care Act allows payment of tax credits and cost-sharing reductions only in the 16 states – and the District of Columbia – that set up their own insurance marketplaces.

These states include Oregon, New Mexico and Nevada, which were approved as state marketplaces but currently use the HealthCare.gov infrastructure.

The plaintiffs cite a section of the health care law that says the tax credits can only be applied to coverage purchased “through an exchange established by the State.”

“We have clear text,” said Jonathan H. Adler, a law professor at Case Western Reserve University who helped craft the legal challenge. “In any normal contest, this would be easy. This would be a 9-0 case.”

The Obama administration maintains that a full reading of the health law makes clear that Congress intended to provide the tax credits in all states. The Internal Revenue Service, therefore, used a broad interpretation of the law to authorize the subsidy for coverage purchased on the state and federal marketplaces.

Supporters say the law’s legislative intent is clear and that Congress never would have passed a law that restricted the subsidies.

“Basically the plaintiffs in this case are saying that Congress intended to take state citizens hostage and threaten to destroy state insurance markets if states didn’t create state exchanges,” said Stuart Raphael, Virginia’s solicitor general, who wrote an amicus – friend of the court – brief supporting the federal government’s position.

If the court sides with the plaintiffs, Newsome and nearly 7.5 million who get tax credits in the 34 HealthCare.gov states would likely see their monthly premium contributions increase by an average of 255 percent this year, depending on the state, according to estimates by Avalere Health, a health care consulting firm.

Tax credit recipients in Mississippi could end up paying 774 percent more, according to Avalere, while those in Alaska could face a 449 percent hike.

“The federal exchange generally serves low-income populations in (Republican-led) states, so that’s where the premium increases would be concentrated,” said Avalere CEO Dan Mendelson.

The higher rates would also exempt many plan members from the Affordable Care Act’s requirement to have coverage because they might make it too expensive. The law exempts people from the coverage mandate if their area’s lowest-cost Bronze Health Plan – which pays at least 60 percent of medical costs – exceeds 8 percent of their annual income.

The upheaval would shrink the individual health insurance market by 69 percent, or 9.8 million people in the 34 states by 2016, said Linda Blumberg, a senior fellow at the Urban Institute’s Health Policy Center. The chaos would undo much of the progress the health care law has made in reducing the number of uninsured Americans because the unsubsidized premiums would force many to simply drop their coverage.

“We believe that this dis-enrollment is going to happen very quickly, as soon as they receive a bill that includes the entire cost of the premium,” Blumberg said.

More uninsured people would also cause hospitals to provide more charity care at a time when federal funding for indigent patients is being cut because the health law increased the numbers of Americans with health insurance.

Because healthier people would drop coverage faster, premiums would rise as insurers cover a higher percentage of sicker people. America’s Health Insurance Plans, an industry trade association, said as much in its court brief:

“Only those persons who expected higher medical expenses would opt into the system, which would place upward pressure on premiums and further skew the pool of (marketplace enrollees), leading to further increases in premiums and a pool ever-more tilted toward those with higher expected medical expenses.”

That might leave some insurers with insufficient funds to cover claims, according to the American Academy of Actuaries.

“This raises solvency concerns, especially among (insurers) for whom (marketplace) business is a relatively large share of their book of business,” the group said in a statement.

But Edmund Haislmaier, senior research fellow at the conservative Heritage Foundation, said predictions of the individual market’s “death spiral” following a plaintiff victory were exaggerated.

“I just find some of these claims completely stretched,” Haislmaier said, adding that some of the dire predictions were based on erroneous assumptions.

Haislmaier said that only 5.5 million people were likely to lose tax credits, which wouldn’t severely hamper the law’s ability to expand coverage because most of the coverage gains under the law had occurred through Medicaid, which the court case doesn’t affect.

Health and Human Services Secretary Sylvia Burwell has said the Obama administration will offer no alternative for consumers if the high court rules against the government and puts the tax subsidies in jeopardy.

Although each state could restore them by establishing its own insurance marketplace, it’s unclear how long that would take. And fierce opposition to the health law in those Republican-led states makes it an unlikely solution.

But the potential political backlash from millions of Americans losing the tax credits has some Republicans calling for action.

Senate Finance Committee Chairman Orrin Hatch, R-Utah, said he’d soon offer a proposal for a “reasonable and responsible transition” for those who lost tax credits. But he made clear that the ultimate solution for Republicans is to repeal and replace the Affordable Care Act.

In a Wall Street Journal opinion piece this week, Sen. Ben Sasse, R-Neb., said he’d introduce legislation that would allow people who lost tax credits to continue their coverage – and keep their tax credits – for 18 months through legislation known as the Consolidated Omnibus Budget Reconciliation Act, or COBRA.

Without legislative action, Sasse said, Republicans would be blamed for the lost tax credits.

“What will happen next is predictable: A deluge of attacks on Republicans for supposedly having caused this. Daily White House emergency briefings. Liberal interest-group ads of wheelchairs going over cliffs. President Obama’s cheerleaders in the media screaming that ideologues are killing patients,” he wrote.

On Tuesday, the American Academy of Actuaries urged the Department of Health and Human Services and Congress either to let insurers revise their 2016 plan-year premium rates or allow them to submit two sets of 2016 rates – one that reflects the continued use of premium tax credits and one that doesn’t.

The fallback plan is needed because 2016 rate proposals are due by May 15, which will likely be well before the Supreme Court issues a decision.

Newsome, whose teenage son died in a car accident in 2013, said that if a loss of tax credits caused her to drop coverage, her daughters, Alexandria and Zoé, would likely be covered through the Children’s Health Insurance Program, a state-federal program to insure low-income children. But she would once again be uninsured, a prospect that scares her.

A member of the Texas Organizing Project, a grass-roots activist organization, Newsome said she’d be at the U.S. Supreme Court on Wednesday to urge it to retain the tax credits.

“Every human being that walks this Earth deserves some kind of health care,” Newsome said. “It doesn’t matter what it is. They deserve it.”

CORRECTION: This corrects an earlier version that wrongly attributed a reaction from the American Academy of Actuaries.