Congressional proposals to temporarily extend federal health insurance subsidies if they’re lost in an upcoming Supreme Court decision would only delay, not avoid premium hikes, insurance market disruptions and potential coverage losses for millions of Americans.
That’s the main finding of a new issue brief released Wednesday by the American Academy of Actuaries.
Plaintiffs in the King v. Burwell case argue that the Affordable Care Act allows payment of premium subsidies to help purchase marketplace coverage only in the 16 states – and the District of Columbia – that set up their own insurance marketplaces.
The plaintiffs cite a section of the health care law that says the subsidies, or tax credits, can only be applied to coverage purchased “through an exchange established by the State.”
The Obama administration maintains that a full reading of the health law makes clear that Congress intended to provide the tax credits in all states.
If the high court sides with the plaintiffs, nearly 7.5 million in the 34 states that use the federal marketplace at HealthCare.gov would no longer receive the subsidies. That would cause most to drop their coverage.
The upheaval would shrink the individual health insurance market by 69 percent, or 9.8 million people in the 34 states by 2016, according to the Urban Institute. Because healthier people would drop coverage faster, premiums would rise as insurers cover a higher percentage of sicker people.
That could leave some insurers with insufficient funds to cover claims, according to the academy.
"Even if a temporary extension of premium subsidies would help avoid disruption in the short term, it is likely that the disruption would be only delayed, not avoided altogether,” the academy brief noted. “If the subsidies are ultimately eliminated, potentially millions of individuals will drop coverage and premiums will increase substantially, unless other equally strong mechanisms are implemented."
In exchange for extending the subsidies, Johnson's bill calls for eliminating the individual mandate that requires most Americans to have coverage or face a tax penalty. It also repeals the employer mandate that requires certain employers to provide coverage for their workers and the health law’s insurance coverage mandates.
The proposal would help in the short term by allowing people to maintain their coverage, the academy wrote. But those who are newly eligible for subsidies would likely not benefit from the extension.
"This would lead to lower overall enrollment in the individual market, as some individuals would transition out of coverage, but few would transition in," the brief said.
Eventually, people would ultimately begin dropping coverage as the subsidy extension phased out and premiums began to rise. The actuaries say the net effect of a temporary extension of subsidies would delay disruption of the insurance market, not avoid it.