This morning, the Supreme Court of the United States ruled that individuals who purchase health insurance through the federal government’s exchange will continue to be eligible for tax subsidies.
This King v. Burwell ruling came after months of political upheaval and planning for the aftermath of the court decision. An estimated 87 percent of individuals who enrolled through healthcare.gov are receiving subsidies. If the plaintiff had won the case, more than 6.4 million people would have lost the subsidies and faced an average premium rate increase of 47 percent, according to the RAND Corporation. The Urban Institute estimated that by using the available subsidy, a typical single person earning below 200 percent of the poverty level spends 4.1 percent of their annual income on insurance. Without the subsidy, it would take 30 percent of that person’s income to keep the insurance.
The case revolved around four words in the Affordable Care Act (ACA): “established by the state.” The plaintiff argued that this means the law prohibits the federal government from providing premium tax credits and cost-sharing reductions to residents who live in states that did not establish their own state health insurance marketplaces. Thirty-four states do not have state-based exchanges.
Today, Justice Roberts wrote in the ruling that “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them” and that the law must be read with its intent in mind.
The White House went on record multiple times that it did not have a contingency plan to restore subsidies if the Supreme Court ruled against the administration.
If subsidies were shut down, analysts predicted a classic “death spiral.” Insurers would suddenly have a risk pool filled with high-need, high-cost people, after having priced their 2015 premiums based on a balanced pool containing both healthy and sick people. Many insurers might leave the market, and remaining plans would be forced to absorb disproportionately high-risk customers from any exiting insurers, as they’re required to do under the individual mandate.
The insurance and hospital industries are hailing the rule for creating a “more stable” future. Share prices soared, with several hospitals hitting all-time highs. Democrats on the Hill announced the ruling as a win for America while many Republicans made it clear they will not give up their efforts to repeal the law. Presidential candidates on both fronts released statements and took to Twitter to share their views.
Rand Paul posted that “this decision turns both the rule of law and common sense on its head,” while Hillary Clinton tweeted, “Yes! SCOTUS affirms what we know is true in our hearts & under the law: Health insurance should be affordable & available to all.
Although there will continue to be hot rhetoric from Republican presidential candidates, this suit has been widely regarded as a “final test” for the ACA. It is highly unlikely that the ACA will have to face another legal challenge of this magnitude in the courts. The other controversial provision, the individual mandate, was upheld by the Supreme Court in 2012.
It appears the ACA is the law of the land – here to say forevermore… unless there is a total Republican sweep of Congress and the White House in 2016. Then the fun begins again.