Washington — As the U.S. Supreme court gets ready on Wednesday to hear a major legal challenge to the Affordable Care Act, Republicans in and out of Congress — but not Gov. Bobby Jindal — are scrambling to come up with plans for what to do if the attack succeeds in eviscerating the landmark legislation of Democratic President Barack Obama.
In New Orleans, Lindsay Pick is hoping it won’t come to that.
Pick, 31, is one of nearly 185,000 Louisiana residents who have signed up for coverage under the ACA, known as “Obamacare.” The owner of a Mid-City bed and breakfast who also works part-time with a swamp-tour company, she qualifies for a federal subsidy to help her cover the cost of the plan, as do nine out of 10 Louisianians enrolled through the health care act.
It is those subsidies that are at the heart of the lawsuit before the Supreme Court.
The wording of the ACA refers to subsidies funneled through a health care exchange “established by the state.” The law contemplates that states will set up the exchanges, and 13 of them — mostly controlled by Democrats — did. But when the rest — including Louisiana — did not or could not, the federal government stepped in to operate exchanges in those states.
The plaintiffs in the case, backed by a conservative advocacy group that opposes Obamacare, argue that the law strictly limits subsidies to states that established state-run exchanges. The Obama administration, as defendant, maintains that Congress did not mean to restrict the subsidies in that way when it passed the law in 2010.
The court will hear oral arguments in the case Wednesday but is not expected to issue its decision until late June. If it rules against the administration, the subsidies could be cut off in a matter of weeks.
“That’s really messed up,” Pick said.
“I have very good coverage,” she said. “I even have dental insurance for the first time.”
Pick said she pays about $160 a month for her coverage under Obamacare, which she couldn’t afford without the subsidy. That puts her at the high end of the scale among subsidy recipients in Louisiana: The average, subsidized Obamacare enrollee in the state pays $108 a month for coverage, according to the federal Department of Health and Human Services. That accounts for 25 percent of the cost of the insurance, with the average subsidy in Louisiana equal to $322 a month.
Subsidies are paid on a sliding scale, depending on income and family size, and the subsidy covers the premium for a “silver” plan above the amount for which the insured is responsible. A single person like Peck qualifies for a subsidy if earning less than $46,680 a year. If she earned less than $11,670, she wouldn’t be eligible for a subsidy because she would qualify for Medicaid (that minimum figure is higher in states that — unlike Louisiana and most other Republican-run states — have expanded Medicaid under the ACA).
Before Obamacare, Pick said, she actually paid less for a bare-bones medical plan that did not cover preventative care (or dental care). But because of other parts of the ACA that would not be affected by the lawsuit, Pick could well be unable to buy a low-cost policy should the subsidies be eliminated.
The ACA limits the ability of insurance companies to charge higher or lower premiums based on the risk of individuals incurring health expenses. The companies are still allowed to charge older people and smokers somewhat more, but they can’t charge more for people with chronic diseases, for example.
The greater the number of healthy people enrolled in a plan, the lower that the premiums can be kept and still generate a profit for the insurance company, which will have relatively fewer treatment costs to cover. The subsidies encourage younger, healthier people to sign up for coverage that they might otherwise forgo.
But without the subsidies, more of those younger, healthier people will figure the risk of getting sick isn’t worth the cost of health insurance, and they will drop their coverage. That means the pool of people who are insured is less healthy overall, and generates more treatment costs — and the insurance companies have to raise their premiums to cover those costs.
Health economists say the process feeds on itself: As premiums rise, more people drop coverage, leaving only those unhealthy people who need insurance at almost any price in the pool, which increases per capita treatment costs and drives premiums ever upward in what’s called a “death spiral.” The result is a collapsing health insurance market — something that happened to some degree in the 1990s in states that adopted ACA-like restrictions on differential premiums but did not provide subsidies.
The RAND Corp., a private, nonprofit research organization that receives some of its funding from the health care industry (which opposes the lawsuit), estimates that if the subsidies are repealed, the number of insured will drop by 70 percent in the states with federal exchanges — and premiums will rise by 47 percent in those states.
And that’s not just for the 6.5 million Americans with subsidized Obamacare coverage in those states: That’s for virtually all insurance offered there through the individual market, which includes millions more who don’t get their insurance through their employer or through government plans for veterans or others. And the effect of the Obamacare coverage mandates in checking the flight of healthy individuals from the insurance market will be diluted because the mandates don’t apply if no affordable coverage is available.
For a Louisianian now receiving a subsidy, it would be a double whammy: Instead of a payment of $108 a month on average, the cost would rise to more than $623 a month for the same coverage, if the RAND predictions come true (although the effect could be delayed until the next premium-setting window).
The individual market amounts to less than 10 percent of the total health insurance market, but the number of people that could be hit hard by a victory for the plaintiffs has made many Republican elected officials jittery (Democrats are mostly standing their ground with Obama in defense of the law).
“Some wish to let the chips fall where they may,” U.S. Sen. Bill Cassidy, R-La., wrote Monday in a column on the Supreme Court case for The Hill newspaper. “This school of thought holds that if the subsidies, mandates and penalties vanish, the private health insurance market will return to the status quo before Obamacare.
“As a doctor who practiced for 32 years, I can tell you this is wrong,” Cassidy wrote. “Obamacare scorched the earth of the health insurance market as it once was.”
Cassidy has proposed a mix of tax credits, health savings accounts and other features in state-run programs designed to increase access to affordable care.
Three other Republican senators this week pitched a proposal that includes temporary financial help to people who would lose their subsidies to enable them to keep their insurance plans. And three high-ranking House Republicans have pitched their own changes to the health law in light of the looming court case.
But the plans have been short on detail — and in any case, moving any proposal through a fractious Congress and winning approval from Obama is a major challenge.
Meanwhile, some Republican governors are talking about setting up ACA exchanges or taking other steps to mitigate the impact of a decision that would end the subsidies.
But not Jindal. In a column Tuesday for the National Review, Jindal criticized Republican efforts to preserve the subsidies. Eliminating them, he said, would amount to a tax cut of tens of billions of dollars.
Gregory Roberts is chief of The Advocate Washington bureau. His email address is firstname.lastname@example.org and is on Twitter @GregRobertsDC. For more coverage of national government and politics, follow The Advocate Politics Blog at http://blogs.theadvocate.com/politicsblog/