More than 500,000 North Carolinians stand to lose subsidized health coverage based on a challenge to the Affordable Care Act that goes to the U.S. Supreme Court this week.
Also at stake is the financial stability of the insurance companies, medical professionals and others that have come to count on the federal money the act provides to help low- and moderate-income people who don’t have workplace health coverage.
The court is scheduled to hear arguments Wednesday in King v. Burwell. The plaintiffs argue that four words in the complex law preclude the federal government from setting up the health insurance exchange that almost 560,000 in North Carolina and 210,000 in South Carolina used to buy policies this year. Roughly 90 percent got federal aid.
A ruling won’t come until late spring or early summer. But it could rock the Carolinas if the subsidies are cut off.
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Experts say that would quickly lead to rate spikes, with the healthiest people dropping their coverage while the sickest struggle for ways to keep their insurance.
“Insurers in the affected states would immediately find themselves in a situation where premiums revenues were insufficient to cover the health care expenses of the remaining enrollees, who would be far sicker on average than what insurers assumed when they set their premiums for 2015,” Larry Levitt and Gary Claxton of the Kaiser Family Foundation, a nonprofit health policy group, wrote last week.
“This would trigger a classic ... ‘death spiral,’ where insurers would seek very large premium increases, which in turn would cause the healthier of the remaining enrollees to drop coverage.”
The impact would be felt far beyond the Carolinas.
“The doomsday scenario could materialize, and it does impact everyone” in the about three dozen states that use the federal exchange, said Christopher Condeluci, an attorney who worked for Iowa Republican Charles Grassley on the Senate Finance staff during the drafting of the law.
N.C. Gov. Pat McCrory said last week the potential overturn of the subsidies puts the state in “a very precarious position.” He urged the president and Congress to work together “in anticipation of (a) potential court decision, as opposed to reacting to a court decision.”
Last week, Health and Human Services Secretary Sylvia Burwell told Congress the administration has no backup plan. “We know of no administrative actions that could, and therefore we have no plans that would, undo the massive damage to our health care system that would be caused by an adverse decision,” a spokesperson for her department said.
U.S. Sen. Richard Burr, a North Carolina Republican, is a leader in the push to repeal “Obamacare” and replace it with a more market-driven approach. His Patient Choice, Accountability, Responsibility, and Empowerment Act (Patient CARE), co-authored with Sen. Orrin Hatch of Utah and Rep. Fred Upton of Michigan, would repeal the act’s coverage mandate and revamp the subsidized marketplace.
A Burr spokesperson said Friday that Burr would work to provide “relief” if people lose subsidies because of the Supreme Court ruling but did not provide specifics.
All of this is part of a fiercely partisan battle over health care reform. It started long before the ACA passed in 2010 without a single Republican vote, and it has continued ever since.
The law’s current challengers point to four words in the act that say subsidies shall be distributed through marketplaces “established by the state.” Many Republican-led states, including the Carolinas, resisted creating such exchanges. Their residents are served by the federal HealthCare.gov.
Supporters of the law contend it’s clear from the overall bill that Congress intended for the subsidies to be available through both federal and state-run markets.
The King suit was filed by four Virginians who dislike the act and do not want to buy insurance. They’re asking the court to strike down the IRS regulation making subsidies available through the federal marketplace.
If that happens, it’s unclear whether the decision would prove a victory or debacle for Republicans. Some say it would hobble Obama’s plan and clear the way for GOP efforts to repeal it and start fresh.
Burr’s office, for instance, sent a statement saying the loss of subsidies would represent one of “Obamacare’s broken promises.” That statement touted the Patient CARE act as a long-term replacement that “empowers individuals, families, and states in their health care choices instead of the federal government and actually lowers health care costs.”
On the flip side, more than 8.8 million people across the country got their 2015 coverage through the federal exchange, and most got subsidies.
If subsidies are canceled, most insurers could not drop plans without giving one to three months’ notice. But the companies remaining in the market would likely seek sharp increases in premiums for the following year, anticipating that the consumers most likely to hold onto their plans would be those needing medical care.
One Rand Corp. analysis projects that unsubsidized premiums could increase by almost half – an average annual increase of about $1,600 for a 40-year-old – and that 70 percent of consumers both inside and outside the federal marketplace would cancel their policies.
Those price increases, in turn, would drive more people to drop coverage, spurring further price hikes.
“It’s not the subsidy market that will fall apart, it’s the whole market” for people who don’t get job-based insurance coverage, said Robert Laszewski, a consultant for the insurance industry who is no fan of the health law. “There will be millions of Republicans who are not subsidy-eligible who are also going to get screwed.”
Experts say Congress could apply “fixes,” such as voting to allow subsidies to continue through the rest of the year. But whether a Republican-controlled Congress that has pledged to repeal the law would agree to that is uncertain.
Aetna spokeswoman Cynthia Michener said the insurer is talking with lawmakers from both parties “about how to make a grand bargain should the Supreme Court decide against federal exchange subsidies.” A decision to strike the subsidies would likely “spur bipartisan action to resolve the issue promptly,” she added.
At the state level, officials could decide to establish state-run marketplaces, but they would have to move fast before the start of open enrollment for 2016, tentatively set to begin Nov. 1. And lawmakers in many GOP-led states are likely to resist such steps, citing opposition to the law.
N.C. Senate President Pro Tem Phil Berger’s office declined the Observer’s request for an interview or statement about preparations.
“With the court case not yet underway, we wouldn’t feel comfortable speculating on what might happen at this very early stage,” said spokeswoman Shelly Carver.
Julie Appleby of Kaiser Health News contributed.