Health Insurance Subsidies Won’t Go Away With Supreme Court Decision WEB

Health Insurance Subsidies Won’t Go Away With Supreme Court Decision

Subsidies won’t go away no matter what the Supreme Court decides, but they are on shaky ground — long term. 

Supporters and critics of Obamacare share something in common: They are equally wrong when they say premium subsidies to buy Obamacare plans are in imminent danger of ending.

The U.S. Supreme Court will decide in early June if premium subsidies are legal in the 37 states (and District of Columbia) that did not establish a state-based health insurance marketplace. The plaintiffs argue the language of the Affordable Care Act — in its narrowest interpretation — does not allow subsidies to be offered through healthcare.gov because it was not “established by a state.”

So millions could lose their subsidies, right? And most of them will drop their health insurance plan, right? And this will lead to an economic slow down, right?

Wrong.

Here are four reasons why no one is in immediate danger of losing their health insurance premium subsidies.

  1. The Court could rule in favor of the Obama administration and allow subsidies to continue just as they are today. Odds takers say there is better than 50/50 chance this takes place.
  2. The justices hinted in the oral arguments last March that it has the authority to phase in a change to subsidies, buying time for Congress to act or “fix” the restrictive legislative language. There is precedent for this in Northern Pipeline Construction Co. v. Marathon Pipe Line Co.a Supreme Court case arising out of the Bankruptcy Act of 1978, which fundamentally reshaped American bankruptcy law. The law created bankruptcy courts with broad powers. The Supreme Court said in 1982 that the structure of these courts interfered with the constitutional authority of the judicial branch. But importantly, in order to avoid massive disruption of recently completed bankruptcy proceedings, the Supremes only applied it prospectively, in order to allow Congress some time to revisit the statute.
  3. Healthcare.gov could quickly pivot to become a service provider to the states by operating as a SaaS-like vendor.  A state could “establish an exchange” and hire the federal marketplace to run it on a contractual basis. Like the federal government, states have emergency powers that could be put in place within days to create a temporary mechanism to continue subsidies. Sure, the governor of a state could choose to ignore this obvious solution, but he or she would be taking away free money from their constituents.
  4. Republicans in the House and Senate have recently released proposals to allow the continuation of the subsidies at least through January of 2017. It is likely the proposals would garner enough Democratic support to be veto-proof by President Obama. Keeping subsidies in place is good politics for Democrats in the next presidential election.

According to a Rand study, there are about 8 million Americans who receive subsidies in the affected states. No, subsidies will not go away anytime soon — no matter what the Supreme Court decides.

But in the long term, we have a much different story. Health insurance costs continue to rise, and the price tag for providing subsidies to Americans will only increase, year after year. Who will pay the bill? Funding mechanisms to offset the costs are continually under assault. The Cadillac tax, a reduction in Medicare payments to doctors and a medical device tax are all supposed to fund subsidies – but none of these things might happen. Yet demand for services will continue to grow, and there are no rewards for consumers to stop ineffective healthcare spending or to change their lifestyles. Costs will steadily escalate, and there is no set solution to pay for our equally escalating utilization of healthcare.

The Supreme Court’s decision won’t eliminate subsidies right now, but our consumption coupled with no clear answer on how to pay for subsidies just might.

 

Comments