Hospitals are just beginning to hash out contingency plans as the waiting begins for the U.S. Supreme Court to decide whether to end insurance subsidies in most of the country.
Some of the financial gains that hospitals have experienced from having a greater number of insured patients may be erased if the court rejects the use of subsidies for individuals who purchase health plans from the federal exchange.
The loss of subsidies would affect about 7.5 million people in at least 34 states if the plaintiffs prevail in King v. Burwell. The subsidies offset nearly three-quarters of household premium costs.
“The uncertainty and the instability make it difficult for systems just to plan,” said Mike Lappin, the chief administrative officer for Aurora (Wis.) Health Care.
Nonetheless, the health system's leaders will attempt to game out multiple scenarios in the months between Wednesday's oral arguments and the decision expected in June.
That will include coming up with a strategy to communicate with the estimated 48,000 patients who received premium subsidies through the state's federally run insurance exchange.
Wisconsin Gov. Scott Walker, a likely candidate for the Republican presidential nomination, has rejected the possibility of creating a state-run exchange.
If those patients lose their subsidies, Lappin said, Aurora Health Care would likely see a rebound in unpaid medical bills and financial aid requests—both of which declined after many of the state's uninsured residents gained coverage with the help of the subsidies. Patients who lose insurance, he added, are likely to delay care until a health emergency sends them to the hospital. “That's not a great situation for anyone,” he said.
Trinity Health, a national not-for-profit health system based in Livonia, Mich., said it would work with Congress, the CMS and state leaders to help patients keep their insurance if the Supreme Court strikes down the subsidies.
"We're mindful that 4.2 million people in the states where we serve are at risk of losing their health insurance and we are, therefore, engaged in King v. Burwell scenario planning on several fronts,” said Tina Grant, Trinity's vice president of public policy and state advocacy. “For us, the public policy space is the most pressing. Should the Supreme Court rule in favor of plaintiffs, we are hopeful that a legislative patch will follow shortly to prevent coverage gaps."
The system was among the not-for-profit hospital operators to modify its charity care policy to limit financial aid for patients who are eligible for Affordable Care Act subsidies. "If a lack of subsidies prevents people from enrolling, or forces them to drop coverage, we have reviewed our current charity care policy and are confident that we are well-positioned to accommodate those individuals," Grant said.
Still, a number of provider systems in potentially affected states said it's still too early to comment on contingency planning for a ruling against the Obama administration.
Such an outcome could threaten credit ratings for not-for-profit health systems, credit rating agencies have warned. On the for-profit side, however, analysts have estimated the loss of subsidies would jeopardize less than 4% of pre-tax earnings.
Most of the benefit from healthcare reform has come from Medicaid expansion and not the exchanges, said Brian Tanquilut, an analyst at Jefferies.
In Alabama, which has not expanded Medicaid eligibility, the Affordable Care Act hasn't made much of a difference yet for Huntsville Hospital, which has even seen its bad debt increase as more patients come in with high-deductible plans.
Huntsville Hospital experienced a modest increase in volume from patients enrolled in exchange plans, but many of those patients previously had employer coverage, CEO David Spillers said.
While the loss of any insured patients would hurt in the event of an adverse ruling, Spillers said, he is more concerned that a decision against the subsidies would derail any momentum that's building around healthcare reform in Alabama.
The magnitude of the potential jolt to the ACA makes it impossible to even formulate a plan. “We're a state that's finally talking about Medicaid expansion—that's a benefit,” he said. “How do you budget if healthcare reform goes away?”
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