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Policy & Regulation News

Impact of Healthcare Subsidies Case Could be Substantial

By Ryan Mcaskill

According to new reports, King v Burwell could have a major impact on healthcare, depending on the ruling.

- Many experts have stated that the outcome of U.S. Supreme Court case King v Burwell will have a major impact on the healthcare industry. The case will be argued on March 4, 2015 and focuses on authorized tax credits on health insurance exchanges and the legality of the healthcare subsidies.

Health and Human Services Secretary Sylvia Burwell is confident that the administration will win this case. In a press conference in December, she refused to even talk about a contingency plan.

“What we’re doing right now is focusing on open enrollment,” Burwell said at the time. “We believe we are in a place where our argument and our position will prevail.”

While confidence in a matter like this is important, having a plan for an adverse outcome is a must. This is especially true base upon the potential impact that a ruling against Burwell will have according to a pair of new reports.

The first report was released by the RAND Corporation. It examined the expected changes in enrollment and premiums in the Patient Protection and the Affordable Care Act. The study predicts that enrollment in the ACA-compliant individual market, including plans sold in the marketplaces and those that comply with ACA regulations but are outside the marketplace, in states where the subsidies were eliminating would decline by 9.6 million or roughly 70 percent. It was also predicts that unsubsidized premiums in the ACA-compliant individual market would increase 47 percent.

“Our analysis indicates that eliminating subsidies in federally facilitated marketplaces (FFM) states would have significant ramifications for the ACA-compliant individual market, potentially threatening its viability,” the report reads. “In addition, eliminating subsidies in FFM states would hamper the ACA’s ability to accomplish one of its key objectives: expanding access to health insurance coverage. This research report reaffirms that subsidies are an essential component to the functioning of the ACA-compliant individual market.”

The second report comes from the Urban Institute with funding from the Robert Wood Johnson Foundation. It predicts that the number of uninsured Americans would increase by 8.2 million in 2016 if the Court rules that premium tax credits cannot be extended to people living in the states with FFMs. It was also discovered that, on average, the annual premium for nongroup insurance coverage in FFM states would increase 35 percent or $1,460 per person.

“If tax credits and cost-sharing reductions are eliminated, there will also be indirect effects,” the report reads. “The mix of individuals enrolling in nongroup insurance would be older and less healthy, on average. The lack of tax credits would make coverage unaffordable for many. As a result, fewer people would be required to obtain coverage or pay a penalty because the cost of insurance would exceed 8 percent of income, the affordability threshold set under the law.”



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