Nearly 10 million fewer Americans will enroll in health insurance coverage through the individual market if the U.S. Supreme Court invalidates subsidies for those buying insurance on HealthCare.gov in the 34 states that haven't established their own exchanges, according to a new study released by the RAND Corp.
The number of individual market enrollees would plummet from 13.7 million to 4.1 million in the affected states.
The large number is the result of an expected ripple effect if those subsidies go away. First those now getting the subsidies would drop coverage, unable to pay for it. That would lead to a smaller pool of insured that would drive up premiums for everyone, whether they purchased through an exchange or elsewhere, the report notes. Premiums would spike by nearly 50%, it estimates. A 40-year-old nonsmoker who purchases a silver-level plan, for example, would face a $1,610 annual increase in payments, according to the analysis by the not-for-profit research organization.
The issue is of crucial importance because of the Supreme Court's decision to take up the King v. Burwell case. At issue in the lawsuit is whether language in the Patient Protection and Affordable Care Act stating that subsidies can be accessed through an exchange “established by the state” prohibits financial assistance to residents of states that are using the federal marketplace. Oral arguments are scheduled for March; a ruling is expected in June.
“The disruption would cause significant instability and threaten the viability of the individual health insurance market in the states involved,” said Christine Eibner, senior economist at RAND and a study co-author, in a statement. “Our analysis confirms just how much the subsidies are an essential component to the functioning of the ACA-compliant individual market.”
A previous analysis by researchers at the Urban Institute found that eliminating subsidies in the 34 states without their own exchanges would result in 7.3 million low- and middle income individuals losing access to $36 billion in subsidies in 2016. And an analysis by Democratic staffers on the House Energy and Commerce Committee estimated the potential decrease in financial assistance at $65 billion.
The RAND study also looked at what effect eliminating the individual mandate would have on the insurance market. It found that premiums would rise by just 7%, but it would result in a 20% drop in individual market enrollments and 8.2 million fewer people insured. The dropoff would be particularly dramatic for the 18- to 34-year-old demographic groups, which is seen as crucial for creating a balanced risk pool in the exchanges. The number of young adults insured through the individual market would drop by 27.4%, according to the RAND analysis, from 5.4 million to 3.9 million.
“This is the young invincible population that is maybe less likely to feel they need health insurance,” Eibner said.
Roughly 65% of the nearly 20 million individual insurance market customers are accessing subsidies, which are available for households with incomes up to 400% of the federal poverty threshold. That includes plans purchased both inside and outside the state and federal exchanges. The average premium for 2015 coverage is $4,210, according to the RAND analysis, but an average of $1,750 of that bill is covered by federal subsidies available under the ACA. That amounts to a total of $34.7 billion in subsidies in 2015.
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