Have you heard the news?
The Supreme Court will soon have a decision in the King v. Burwell case, which will determine whether government subsidies for individual health insurance plans are legal. This impacts 37 states that chose not to create their own online insurance marketplace, deciding instead to use the federal government’s Healthcare.gov website.
I’ve spent way too much time studying this stuff over the past five years and have even found myself dreaming (or having nightmares?) about health reform, so let me see if I can explain this in a way that will make sense.
Here’s the issue…
This entire court case centers around four words in the 2,500 page health reform law. Section 1321 of the Affordable Care Act says that the advance premium tax credits (or subsidies) that help people pay for health insurance in the individual market are available through exchanges “established by the state.” That has led some to question whether the subsidies should be provided in states that didn’t establish their own insurance exchange.
If you’ve kept up with the case (and I totally understand if you haven’t set up an online alert to get the breaking news!), you’ve probably heard about all of the horrible stuff that might happen if the Court finds in favor of the plaintiffs – millions of people will lose their government subsidies and will no longer be able to afford health insurance; hospitals and insurance companies will lose millions of dollars; and insurance premiums will spiral out of control. In short, many feel that a ruling against the Act would completely derail President Obama’s signature health reform legislation.
Is that true?
Could this really be the end off the ACA? Or are all of the dire predictions just a lot of hot air? Here’s a short overview of the case and a few things you need to know in advance of the Court’s decision.
1) This is not a case about whether Obamacare should be overturned.
The law is the law, and that will still be true regardless of the outcome. However, in 37 states around the nation, the case could have a huge impact on some of the major provisions of the Affordable Care Act.
If the government subsidies are tossed out, about 6.7 million people would lose the financial assistance that helps them pay for their health insurance coverage and would likely choose to drop it altogether.
While everyone would still be required to buy health insurance, about 80% of people who lose their subsidies will now be exempt from this mandate because coverage would suddenly be “unaffordable” for them. In short, if the lowest-priced plan available to you after accounting for any employer contribution or government subsidies exceeds 8% of your household income, your coverage is considered unaffordable and you can apply for an exemption from the penalty by completing IRS Form 8965. Without the subsidies, a LOT of people would find their coverage unaffordable.
Many large employers would also be exempt from the employer mandate, the requirement that they must provide health insurance to their workers or pay a penalty, because the employer penalties are triggered only when one of the company’s employees receives a subsidy.
2) If you have health insurance through your work, this case will have little to no impact on you.
Health insurance is a valuable employee benefit, and most companies, whether required to or not, will continue to offer health insurance to their workers. Because employer-sponsored coverage is generally affordable, you and your family members who are eligible to enroll on the company’s health plan are probably ineligible for the government subsidies, so this court case wouldn’t affect your coverage.
3) Even if the Supreme Court sides with the plaintiffs, the subsidies probably won’t go away overnight.
Let’s say the court decides that the IRS should not be handing out subsidies in states that didn’t develop their own exchange, it’ll take a while for subsidies to go away. The Court has indicated that it might extend the financial assistance through the end of the year in order to give Congress time to fix the problem. Republicans in the nation’s capitol are now scrambling to develop a solution to the problem, which could be as simple as changing the wording of the law. They may try to squeeze a few other changes through, too - President Obama has threatened to veto any bill that would repeal the health reform legislation. Finally, this issue could also be fixed at the state level – it might be as simple as the state contracting with Healthcare.gov and calling it a “state exchange.” In short, this isn’t a difficult problem to solve; the question is whether our elected officials will actually solve it.
Last but not least…
If anyone tells you they know what the Court will decide, don’t believe them. Journalists and legal scholars learned long ago that it’s difficult to predict what the Supreme Court will do – the justices often surprise us not only with their decisions, but also with the reasoning behind those decisions. So all we can do is wait and see, but it shouldn’t be too much longer: a ruling in the King v. Burwell case is expected by the end of June.