Q: How many people would become uninsured if the U.S. Supreme Court rules against the administration in King v. Burwell?
A: Two independent analyses put the figure at about 8 million, but that’s only an estimate.
The Supreme Court heard arguments in King v. Burwell, a case about the Affordable Care Act’s tax subsidies, in early March. The court’s ruling is expected in the summer, and it could have a significant impact on state insurance markets and exchanges for individuals set up by the ACA, specifically in states with exchanges run by the federal government.
The plaintiffs in this case — David King and three other Virginia residents — argue that the language of the ACA stipulates that insurance subsidies should only be available in states that set up their own exchanges, not states that rely on the federally run HealthCare.gov. The plaintiffs focus on language in the law about subsidies being available for those enrolled in an exchange “established by the State.” The federal government, meanwhile, argues that the law, as a whole, makes clear subsidies should be available for those enrolling in any exchange, whether established by the state or federal government.
The subsidies are available for those buying insurance through the exchanges and earning between 100 percent and 400 percent of the federal poverty level. The court’s decision could affect the majority of states: Thirty-four states rely on the federally run marketplaces. Another 13, plus Washington, D.C., have their own state-run exchanges, and three others have state marketplaces but use HealthCare.gov to determine subsidy eligibility.
A ruling in favor of the plaintiffs could lead to the loss of subsidies for those who receive them in the 34 states with federal exchanges — if the states don’t take action to set up their own exchanges. And the impact would go beyond only those who had qualified for subsidies. The ruling could also affect the three states — Oregon, Nevada and New Mexico — who use HealthCare.gov for subsidy purposes, but the major analyses of the case’s impact focus on the 34 federally run exchanges.
We’ve seen several numbers on how many people could lose subsidies, and how many could become uninsured.
The New York Times has reported that 7.5 million could lose their subsidies, a number that comes from a Kaiser Family Foundation estimate for those qualifying for subsidies in federally run marketplaces as of mid-February this year. A March report by the Department of Health and Human Services on marketplace enrollment through Feb. 22 confirms that number. (See Appendix Table B8 and subtract out the three state-based marketplaces that only use the HealthCare.gov platform.)
Eighty-seven percent of all those who signed up for health plans for 2015 through HealthCare.gov qualified for subsidies, HHS says. That includes the three states that use the website for subsidy purposes.
But some of those who signed up for plans may not pay their premiums and keep their coverage by the time the Supreme Court rules on the case. And more people may sign up for coverage and get subsidies during a special tax-season enrollment period from March 15 through April 30. The administration said on Feb. 20 that those who are fined for not having coverage in 2014 would be able to sign up for a plan for 2015 at that time.
So, it’s not clear exactly how many could lose their subsidies if the Supreme Court rules against the administration. The Urban Institute estimates that the number receiving subsidies in the 34 states with federally run marketplaces in 2016 would be 9.3 million.
Now, the number that could become uninsured is not the same as the number who could lose subsidies. Many would indeed find it too expensive to keep their health plans without a subsidy, and may qualify for an income-related exemption from the requirement to have insurance if the lowest-cost premium available amounted to more than 8 percent of their household income. The Urban Institute estimates that the typical single person earning below $23,540 (200 percent of the poverty level) spends 4.1 percent of income on insurance by using the available subsidy. But it would take 30 percent of that person’s income to keep that insurance if subsidies were eliminated. HHS can also grant hardship exemptions for other reasons, and it has exempted those who had individual market plans canceled and who believed plans on the exchanges were unaffordable.
But some who lose subsidies would keep their insurance — or get new insurance through a different source. And some who never received subsidies would drop their plans in the face of higher premiums. Some of them, in fact, may also qualify for an income-related or hardship exemption.
Why would premiums go up for those who didn’t receive subsidies? The ACA requires insurers to accept everyone, offer a standard set of minimum benefits, and not charge higher prices based on health status. The only way to keep premiums down in such an environment is with a balanced risk pool — with a mix of young and old, healthy individuals and those with medical conditions. The individual mandate requires the young and healthy to have insurance, and the subsidies make it more affordable for those with low income. Without the subsidies, some would be exempt from the mandate because coverage is no longer deemed affordable. And those most likely to hold onto their insurance despite higher costs are older, and less healthy, individuals who most need coverage. The risk pool becomes unbalanced, and the cost for insurers, and consequently the price of premiums, goes up.
The Urban Institute explains it this way:
Urban Institute, “The Implications of a Supreme Court Finding for the Plaintiff in King vs. Burwell,” January 2015: Because the insurance market reforms are interwoven with the measures to expand coverage, removing the tax credits would make coverage unaffordable for more individuals and exempt them from the individual mandate and reduce the number insured. Those most likely to drop coverage would be disproportionately young and healthy. Such a change in the mix of enrollees would increase the average cost of individuals remaining in the nongroup insurance market, increasing nongroup insurance premiums as a consequence. Since the ACA treats the nongroup market inside and outside the marketplace as a single insurance pool, elimination of tax credits affects not just marketplace enrollees but all those covered by private nongroup insurance in the same geographic area.
The Urban Institute estimates in that January report that unsubsidized premiums would increase by 35 percent, on average, in the marketplaces in those 34 states in 2016. An analysis by the Rand Corp., also released in January, said premiums in those states would increase by 47 percent.
What’s the bottom line for the number of uninsured? The Urban Institute estimates that 8.2 million would become uninsured in 2016 if the Supreme Court rules in favor of the plaintiffs, and the Rand Corp. estimates 8 million would become uninsured in 2015.
The Urban Institute further breaks down those numbers in its March report, saying that about 6.1 million people (that’s two-thirds of those who would lose subsidies) and about 1.2 million who would otherwise purchase individual market plans without subsidies would become uninsured.
But some have used even larger numbers to describe how many would “lose insurance.” Senate Minority Leader Harry Reid said on the Senate floor on March 4 that “almost 10 million people will lose health insurance” if the court rules in favor of the plaintiffs. A Huffington Post headline also included that number saying, “Supreme Court Could Kick 10 Million People Off Health Insurance,” and an Al Jazeera America story said that “an estimated 9.6 million people could lose coverage as a result of this case.”
That’s actually the number of people who would drop their individual market coverage, both within and outside the exchanges, in the 34 states affected by the potential ruling, according to the Rand analysis. A graphic on Rand’s website features that number, saying, “9.6 million people may drop coverage if ACA subsidies are eliminated.” The number of those who would then be uninsured — 8 million — was in the report’s footnote, which said that the other 1.6 million would get new insurance from other sources.
Linda J. Blumberg, one of the authors of the Urban Institute report, told us that analysis looked at a net change in insurance at a particular point in time, and more than 8.2 million could end up being uninsured for part of a year. “The 8.2 [million] or the 8 [million] are reasonable ways to talk about the magnitude of what’s going on,” she said, “but quite a bit more people are going to be affected than that.”
These estimates are based on the 34 states with federally run marketplaces not taking action to set up their own exchanges. If some do, or other aspects of current law change, then these estimates would change, too.
As Rand says in its report: “It is beyond the scope of our model to predict whether the political environment in these states might change in response to a Supreme Court decision eliminating subsidies. To the extent that governors and state legislatures opt to establish their own exchanges, the ultimate impact of eliminating subsidies in FFM [federally facilitated marketplace] states could be smaller than our estimates.”
— Lori Robertson
Howe, Amy. “Justices to weigh subsidies for health insurance: In Plain English.” SCOTUSblog. 23 Feb 2015.
Saltzman, Evan and Christine Eibner. “The Effect of Eliminating the Affordable Care Act’s Tax Credits in Federally Facilitated Marketplaces.” Rand Corp. Jan 2015.
“Health Insurance Marketplaces 2015 Open Enrollment Period: March Enrollment Report.” Department of Health and Human Services. 10 Mar 2015.
Centers for Medicare & Medicaid Services. Exemptions from the fee for not having health coverage. HealthCare.gov. accessed 11 Mar 2015.
Blumberg, Linda J.; Buettgens, Matthew; Holahan, John. “The Implications of King v. Burwell: Highlights from Three Analyses of the Consequences of Eliminating ACA Tax Credits in 34 States.” Urban Institute. Mar 2015.
Blumberg, Linda J.; Buettgens, Matthew; Holahan, John. “The Implications of a Supreme Court Finding for the Plaintiff in King vs. Burwell: 8.2 Million More Uninsured and 35% Higher Premiums.” Urban Institute. Jan 2015.
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Levitt, Larry and Claxton, Gary. “Insurance Markets in a Post-King World.” Kaiser Family Foundation. 25 Feb 2015.
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Young, Jeffrey. “Supreme Court Could Kick 10 Million People Off Health Insurance.” Huffington Post. 9 Jan 2015.
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