The Day AfterKing v. Burwell

Here’s What Will Happen If 7.5 Million People Lose Health Insurance Subsidies

There is a very real possibility that the Supreme Court of the United States could rule against the Obama Administration in King v. Burwell. If they do, the human cost will be swift and palpable.

As many as 7.5 million people who wake up the day of the decision secure in the knowledge that they have health insurance they can afford, that they can get health care when they need it, and that an accident won’t drive them into debt, could head to bed in an entirely different position.

In order to illustrate how and why this ruling has the potential to so substantially disrupt people’s health and economic well-being, it is important to understand the particular piece of the Affordable Care Act before the court.

One way the Affordable Care Act makes sure families have health insurance is by helping lower- and middle-income people who don’t have insurance through their jobs pay their health insurance premiums. This help comes in the form of a subsidy that individuals and families can use to buy health plans through the Affordable Care Act marketplaces.

The law gave each state a choice about how to run their health insurance marketplace — did they want to set it up and run it themselves? Or, would they like the federal government to do that for them? Most states, 34 in all, elected to have the federal government run their marketplaces. Currently, 8.6 million people in states with federally operated marketplaces have selected a health plan through the Affordable Care Act marketplaces and of those, 7.5 million are eligible for help paying their premiums.

According to the plaintiffs in King v. Burwell, a nuance in the language of the law only allows people living in states that opted to run their own health insurance marketplaces to receive the premium subsidies. From their perspective, this means the people who live in states with federally run marketplaces and are receiving subsidies should not be.

The administration argues that this interpretation is incorrect. They say the law always intended to extend the subsidies to everyone because it was created to extend health insurance to all Americans.

The Affordable Care Act Is Doing What It’s Supposed to Do.

So far, the Affordable Care Act is working.

It has created an affordable and comprehensive health insurance option for people who make too much to qualify for Medicaid but don’t have coverage through their employer.

People in this circumstance used to shop for health insurance on their own in what amounted to a free-for-all where insurers would deny coverage to people who had been sick; would offer people insurance but refuse to cover basic things like pregnancy or treatment for a chronic illness like diabetes; and would charge sky-high premiums for terrible coverage that could still leave people in a financial crisis if they became really ill.

Thanks to the Affordable Care Act’s marketplaces and the requirements that insurers have to meet to sell policies there, people buying coverage on their own are now able to buy much better health insurance. And, thanks to the subsidies that help them pay premiums, the coverage is affordable. But this will no longer be the case for everyone in the marketplaces if the Supreme Court rules in favor of King.

What Would Go Wrong if the Administration Loses King v. Burwell?

If you are a 40-year-old nonsmoker in Cheyenne, Wyoming, earning $20,000 annually, you would pay $84 in premiums each month for the benchmark silver plan. If the subsidies are terminated, all of a sudden your health insurance plan jumps to $407 — more than 20 percent of your wages. People facing premium increases of this magnitude would have to choose between health insurance and food, rent, and other essentials. Most would stop paying premiums immediately.

Say, despite the dramatic price increase, you managed to keep paying your premiums for the rest of 2015. Because so many healthy people will have already dropped their health insurance coverage, insurers will be left insuring a very sick pool of enrollees. Premiums in 2016 could spike by 47 percent, likely driving out almost everyone except the very sickest individuals.

Overall, taking subsidies away could result in as many as 9.6 million fewer people with coverage through the individual market, both inside and outside the marketplaces, by 2016 — that’s a 70 percent decline.

The net result would be an individual health insurance market even more dysfunctional than the one we had before the ACA was enacted: while health coverage was unaffordable or entirely inaccessible to those with pre-existing conditions before the ACA, a premium death spiral generated by taking away these subsidies would put insurance out of reach for healthy and sick individuals alike.

“premium death spiral”: as premiums increase, more and more healthy people will be exempt from the mandate and will forgo buying insurance, or, if not exempt, will choose to pay the tax penalty. As a result, sick people would form an ever-greater portion of the risk pool, causing premiums to rise and enrollment to fall.

The consequences would be dramatic because research has shown time and time again that people without health insurance go without health care.

They are less likely to receive preventive care and twice as likely to put off going to the doctor. For example, a woman who has coverage through the marketplace today is three times more likely to obtain an ultrasound for a breast lump or abnormal mammogram than an uninsured woman. People who are uninsured have worse health outcomes and are more costly to the health care system.

By one estimate, the Subsidy Shutdown could result in 9,800 preventable deaths annually.

For uninsured patients who manage to get care, the financial costs would be crippling. Medical debt is already the single largest cause of consumer bankruptcies and it would only get worse as millions joined the ranks of the uninsured. The burden of being uninsured weighs most heavily on those with chronic disease: cancer patients are two-and-a-half times more likely to file for bankruptcy than other people.

The Affordable Care Act has accomplished a lot in a relatively short amount of time. The uninsured rate has dropped from 20 percent to 16 percent among adults ages 19 to 64. People who have traditionally been uninsured—young adults, low-income working families, and people of color have gained health insurance at unprecedented rates. People who must buy coverage in the individual market have nearly equal access to affordable health insurance as people who have the opportunity to get health insurance through an employer.

These are substantial strides for our health care system—strides that take us leaps and bounds closer to finally having a health care system that works as well as it possibly can. Where everyone can get the health care they need, when they need it. It positions us to look forward to other work that must be done nationwide to ensure the system is doing the right things at the right time for all of those in its care.

A full reversal would be devastating to the newly insured, their families, and our prospects for a truly high performing health care system.

This Medium post is based on The Commonwealth Fund’s new blog series from Joel Ario, Michael Kolber, and Deborah Bachrach exploring the impact of King v. Burwell on consumers, insurers, providers and states. View the series.