Tens of thousands of people in Missouri and Kansas could see their health insurance premiums double or even triple if the Supreme Court declares that the tax credits they receive through Obamacare are illegal.
Such a ruling could send both states’ insurance markets into a “death spiral,” a nightmarish scenario that means skyrocketing premiums and a financial crisis for hospitals, health policy experts say.
More than 7.5 million Americans – including 300,000 people in Kansas and Missouri – could lose their subsidies, and thousands more could get slammed with higher premium bills, according to the U.S. Department of Health and Human Services.
Lawmakers in the U.S. Congress and state governments can act to mitigate the fallout, but so far, no alternative plan – or even a short-term fix – is anywhere close to passage. And time is running out.
“The reality is that there are no plans in Congress to do anything that would repair or correct the language in question,” said U.S. Rep. Emanuel Cleaver, D-Mo., in an interview.
“I don’t think the average person has any idea about what’s going on with the Supreme Court until they wake up one morning and find out that they can’t afford their insurance any more,” said Cleaver, of Kansas City.
The court is expected to decide by the end of June whether to discontinue tax credits in states where the federal government operates the health insurance marketplace.
Plaintiffs in the case, King v. Burwell, argue that language in the 2010 Affordable Care Act – also known as Obamacare – restricts the payment of tax credits to people who live in the 16 states, and the District of Columbia, that have established their own insurance marketplaces.
The plaintiffs point to wording in the health care bill that tax credits can only be obtained on coverage purchased “through an exchange established by the state.”
Kansas and Missouri are among 34 states that never set up their own health-care exchanges, so consumers in those states use the federal marketplace at HealthCare.gov instead.
Kansans who purchased health coverage on the government-run site for 2015 qualified for an average tax credit of $211 per month, HHS data shows.
In Missouri, the average credit was $281 per month.
If the high court ruling declares those credits illegal, more than 223,000 people in Missouri who signed up for Obamacare through the federal exchange would see an average premium increase of 330 percent, according to Avalere Health, a health care consulting firm.
The average increase for nearly 77,000 people in Kansas would be 228 percent.
Projected 2016 impact of plaintiffs' victory in King v. Burwell
In King v. Burwell, the Supreme Court will decide whether federal tax credits to help purchase marketplace health insurance can only go to people in states that operate their own exchanges. In 2014, the tax credits totaled $2.02 billion for 7.69 million people in the 34 states that use the federal insurance marketplace at HealthCare.gov.
Simply drag the cursor over an affected state to see what the impact would be.
More than 1 million 150,000 to 1 million 35,000 to 150,000 Less than 35,000
More than $125 million $45 million to $125 million $15 million to $45 million Less than $15 million
More than $350 $275 to $350 $225 to $275 Less than $225
Source: Health and Human Services
But the pain wouldn’t just be felt by those receiving tax credits.
Premiums also would rise dramatically for anyone who is covered through private non-group insurance in Missouri, Kansas and other affected states, regardless of whether they qualified for any subsidies.
Recent studies by the Urban Institute, a centrist think tank, and Rand Corp., a federally funded research center, estimated that unsubsidized premiums would spike between 35 and 47 percent if the high court denied tax credits to people in Kansas, Missouri and other states that don’t have their own exchanges.
Those who receive coverage through their employers’ group plans likely would not be affected.
The problem is that insurance markets need balanced risk pools – a mix of young and old, sick and healthy people – to keep premiums down.
About 40 percent of those who signed up for coverage through the marketplace in Missouri and Kansas this year were under 35, according to HHS.
If those relatively young and healthy people lose their subsidies, insurance companies expect the vast majority will drop their health plans, said Matt All, senior vice president and general counsel Blue Cross and Blue Shield of Kansas.
“It’s very likely that many, if not most of them, would not be able to afford coverage,” All said.
That leaves a disproportionate number of older, sicker patients in the insurance risk pools, driving up costs.
“Premiums are going to skyrocket,” said Ron Pollack, executive director of Families USA, a national organization for health care consumers. “Most analysts believe we will see a ‘death spiral’ of health insurance in the states because the premiums will increase enormously, and as more and more people drop out, they’ll will go up even more.”
A lot of insurance companies might decide not to do business in the affected states, he said.
And hospitals would suffer financially, especially in low-income communities.
“They’re going to have more and more patients coming to them who don’t have health insurance and can’t pay the bill,” Pollack said. “In rural, lower income communities, a lot of those hospitals may wind up having to go out of business.”
The likelihood that Congress will fix the problem is slim to none, he said.
“Congress could amend the statute to ensure that people continue getting these subsides,” Pollack said, “but then you have to take a look at this Congress and remember that every Republican that ran for office ran on the platform that they were going to kill the Affordable Care Act, so why would they vote to extend the subsidies?”
Republicans say they’re working on a solution that would completely replace Obamacare.
Rep. Fred Upton, R-Mich., and Sens. Orrin Hatch, R-Utah, and Richard Burr, R-N.C., unveiled the outline of a proposal in February that would eliminate the requirement that everyone buy coverage and would stop the expansion of Medicaid.
Their proposal, the Patient Choice, Affordability, Responsibility, and Empowerment (CARE) Act, would keep some popular provisions of Obamacare, such as allowing children to stay on parents’ policies until age 26, although states would be allowed to opt out. States also would have more control over deciding which benefits insurance must offer. People with pre-existing conditions could not be charged more as long as they kept continuous coverage. And those within 300 percent of the poverty line – about $35,000 for a single person – would be eligible for tax credits to help pay premiums.
But the proposal is just in the preliminary stages. It has yet to be drafted into a formal bill.
The lack of progress worries Linda Sheppard, senior analyst for the Kansas Health Institute, a policy research organization in Topeka, Kan.
“It’s scary,” Sheppard said. “I haven’t seen a widespread jump (by lawmakers) to get on board, or even to start debating some of these alternatives. June is not that far away, so the question is when are those discussions going to start in earnest?”
As a stopgap measure, Sen. Ben Sasse, R-Neb., an ardent Obamacare opponent, introduced legislation last month that would cover 65 percent of enrollees’ premium costs for 18 months if a Supreme Court ruling makes them ineligible for credits.
In a Wall Street Journal opinion piece, Sasse warned that Republicans could face a “crippling” political backlash if the high court ends the subsidies.
“Chemotherapy turned off for perhaps 12,000 people, dialysis going dark for 10,000. The horror stories will be real,” he wrote. “What will happen next is predictable: A deluge of attacks on Republicans for supposedly having caused this.”
He fretted that many states would succumb to pressure to “adopt” Obamacare and open their own exchanges.
His bill, Sasse argued, would give Republicans time to come up with a long-term solution.
Cleaver, the congressman from Kansas City, commended Sasse for taking initiative, but he said the proposal seems imprudent.
“What will happen after the 18-month transition, when we are right back where we started?” Cleaver asked. “These are people’s lives, after all, and my colleagues in Congress have had years to come up with an alternative. Why should we take them at their promises when their practices speak volumes?”