It turns out that 7 out of 10 surveyed individuals in the U.S. are unaware of the Supreme Court case (and eminent ruling on) King v. Burwell. As a nice coincidence, it also turns out that the case could affect almost 7 in 10 households in the United States as well. It could also have an incredibly negative effect on health insurers.
The case is yet another case on the Affordable Care Act (or Obamacare). This time the question is not one of individual freedom and the right for an individual to
be an idiot make a dubious economic decision and live without health insurance. Nor is it a question of the business as person with the religious freedom to prohibit their employees from receiving contraception as part of the employer health plan. This time, it’s about whether the lower- and middle-income individuals in 34 states should receive subsidies to help pay the premiums for health coverage. That’s it. No great principle of freedom or justice, just a question of whether lower- and middle-income individuals should receive help paying their health coverage premiums or not.
To give you an idea of what this removal of subsidies would mean, take a look at an individual who buys their insurance on the exchange and makes 200% of the Federal Poverty Level (FPL). In 2014, the Federal Poverty Level was 11,670 for an individual, so our hypothetical individual would make $23,340. With the subsidies in place, this individual would pay $1,470 out of pocket per year in premiums. If the Supreme Court removes the subsidies, this individual will pay $3,833 in premiums, for a difference of $2632 a year just for the premiums. And this is just for the premiums. It doesn’t include out-of-pocket costs for deductibles, co-insurance, etc.
I’m not surprised, but still disappointed, that Indiana has filed an amicus brief in the case arguing that the subsidies should be removed. As I’ve pointed out before, the political leaders of Indiana have been organizing health insurance in ways unfriendly to the lower-income individuals. And yet, I was hopeful they could find some better use of our states resources than to file a brief to make it harder for individuals making about $47,000/year and couples making about $96,000/year to afford health coverage.
Not surprisingly, if the Supreme Court decision removes the subsidies, the predictions are that millions of individuals would stop buying insurance through the Exchanges. Without the subsidies, it will be cheaper to pay the tax than to buy the insurance. Especially for relatively healthy, young people. And this is where health insurers will pay.
Because Obamacare requires insurers to cover all individuals who apply, but also caps the differences in premiums that individuals can be charged, the insurers will be subject to adverse selection. The chronically and acutely ill will be sure to have insurance (or get it) and thereby take advantage of the coverage, while healthy individuals will not. It’s not surprising then, that the health insurance industry’s leading trade organization (AHIP) filed in amicus brief in favor of keeping the subsidies.
The Supreme Court decision, if it removes the subsidies, will be a statement of values more than a statement of law. But since we can’t tell those nine justices what to rule, no matter how much we might like to, perhaps we should just sit back and relish this special moment. I mean, how often do the interests of health insurance companies and lower- and middle-income individuals align.
Abraham Schwab is an associate professor of philosophy and a medical ethicist at IPFW.
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