King v. Burwell, the case that is causing sleepless nights to Obama administration, Health Plans, and Consumers with Obamacare subsidies, may have yet another implication that could skew premium increases across the nation for everyone. No matter which way the Supreme Court ruling goes, the health insurance premiums are set to rise drastically next year and that’s going to impact everyone, including people who are not availing subsidies from the exchange. The reason is simple – the Supreme Court decided to entertain the King v. Burwell argument and the decision on the same will not be disclosed before late June.
In King v. Burwell, the plaintiffs have moved the Court against a particular verbiage in the law that, according to plaintiffs, does not allow the federal government to issue health insurance subsidies to consumers from states which have not established their own health exchange. Under this challenge, 34 states that are using the federal exchange cannot legally provide subsidies to their citizens. On the other hand, the administration says that in the context of the entire law, this challenge holds no basis and the intention behind framing the law was to provide subsidies to states that are providing health insurance through the federal marketplace.
The federal appellate courts agree with this argument of the Obama administration and the same sentiment was echoed in Fourth Circuit Court of Appeals in Richmond last year, establishing the subsidies as legal in the 34 states that are using the federal marketplace to provide ACA coverage to citizens. However, when the Supreme Court decided to hear the case, it got a lot moreserious. Now, with Supreme Court deciding to disclose the decision by late June, health insurance plans are in a state of confusion, as they need to submit their health insurance premium rates for 2016 by then. For preparing these premium rates, health plans need to figure in an important factor – what happens if the plaintiffs prevail?
A lot of people who are using subsidies to pay for their health insurance would, obviously, no longer be able to do so. Naturally, this might cause a large number of people to drop their coverage. The highest probability is that the healthy, young people will be the ones that drop coverage, as they will feel coverage isn’t necessary. Once that happens, the percentage of older, sicker people will outmatch the percentage of young, healthy people. To keep the scales balanced, health insurance firms will be left with no other option but to raise premiums to compensate for the larger unhealthy pool.
However, there is a quick solution, the American Academy of Actuaries suggested that the HHS should allow health plans to submit two potential rates – one if the subsidies stay intact and other if the subsidies are scrapped. In that case, two sets of insurance premiums will be available, and that might have a better impact on the mechanics for next year. However, in case the administration does not take this route, most health insurers are expected to prepare for the worst by excluding insurance subsidies in their calculation of market dynamics and presenting health insurance premiums that will be much higher.
No matter which way Supreme Court decision goes, health plans will mostly prepare for the worst and present premiums that will be higher for everyone, even for those who were exempt from subsidies in the first place.