Outcome could lead to chaos in the health insurance markets, Rutgers expert says
The U.S. Supreme Court will hear arguments on Wednesday in a case that threatens to derail the Affordable Care Act – President Obama’s signature domestic policy achievement which has significantly reduced the ranks of the uninsured. Rutgers Today talked to Joel C. Cantor, director of Rutgers Center for State Health Policy and a distinguished professor of public policy, about the details of the case and how the outcome could have wide-reaching implications for millions of Americans.
How did the Affordable Care Act end up before the Supreme Court a second time, two years after the justices ruled the law was constitutional?
Cantor: This challenge is not about constitutionality, it is about a quirk of language in the ACA law itself. Specifically, in one section the law states that private insurance subsidies are to be administered by marketplaces established by the states. Opponents of the law argue that that provision makes it illegal for healthcare.gov, which is run by the federal government not the states, to administer the subsidies. Others argue that the law makes clear that Congress intended that subsidies could run through all the exchanges. The Supreme Court will decide which side is right.
Why would the law unravel if the court finds that residents in states that did not set up their own exchanges are not eligible for subsidies?
Cantor: The private insurance subsidies, in the form of sliding-scale premium tax credits, are essential to expanding health insurance coverage. The ACA also requires that most people buy insurance, a provision known as the individual mandate, but without the subsidies huge number of people would not be able to afford coverage. The mandate is the stick and the subsidies are the carrot to get people to buy coverage. The subsidies, i.e., the carrot, are by far the more important mechanism for expanding coverage. Nearly 90 percent of people buying coverage through healthcare.gov are eligible for subsidies. Most of those would drop coverage without the subsidies.
How successful has the law been at reducing the ranks of the uninsured?
Cantor: Before the ACA coverage reforms, in 2013 17.1 percent of adults had no health insurance coverage by the end of 2014 that percentage dropped to 12.9 percent, according to a Gallup poll. That figure does not count hundreds of thousands more who will have signed up since the start of 2015 (the open enrollment period is just ending).
How many people in New Jersey could be affected?
Cantor: According to an Urban Institute study, 237,000 New Jersey residents would lose premium subsidies, amounting to a loss of $727.6 million in subsidies in the state, and higher premiums would lead about 239,000 people to drop coverage.
Cantor: There would be huge implications even for people who are not eligible for subsidies. Health insurance premiums are based on the average health spending of the insured population, called the risk pool. Risk pools with sicker people get charged higher premiums. Those benefiting from subsidies are on average healthier than those who buy without a subsidy. So if subsidies go away, the risk pool will be much sicker and premiums would immediately spike upward for all of those who buy coverage directly from insurance companies. People who get group coverage through a job would see less impact.
There would also be a major impact on health care providers who benefit from having more patients with private insurance. They depend on the revenue. Because of the coverage expansions, the ACA dramatically cuts charity care funding. If New Jersey has 230,000 more uninsured, as is projected if the Supreme Court blocks subsidies through healthcare.gov, hospitals and other providers will be stuck with a substantial bill.
Is there any hope the law could be saved if the court strikes down the subsidies in states with federal exchanges, or do millions stand to lose their insurance?
Cantor: Thirty-four states, including New Jersey, rely on healthcare.gov. The politics in each state are different. But keeping the subsidies for their eligible population will be enormously challenging even for states that have the political will to do so. It can take years to build the infrastructure needed to run a health insurance marketplace. It may be possible for states to arrange to run their own marketplace using healthcare.gov infrastructure, but they would most likely still need to take on new regulatory and administrative responsibilities that will take a good deal of time to establish.
How bleak will the situation be if the court rules against the federal government?
Cantor: If the Supreme Court bans subsidies through the federal insurance marketplace and gives state little lead time to adjust, there will be chaos in health insurance markets, millions will become uninsured and premiums will spike for millions more. This could happen as early as this summer.
– Andrea Alexander
Media Inquiries: Contact Andrea Alexander at aalexander@ucm.rutgers.edu or 848-932-0556