Almost 50,000 Arkansans could lose health insurance subsidies if Obamacare court challenge prevails | Arkansas Blog

Tuesday, June 16, 2015

Almost 50,000 Arkansans could lose health insurance subsidies if Obamacare court challenge prevails

Posted By on Tue, Jun 16, 2015 at 5:25 PM

click to enlarge IF THE PLAINTIFFS PREVAIL: Arkansas would lose tens of millions in subsidies for low-to-middle income people to purchase health insurance. - FAMILIES USA
  • IF THE PLAINTIFFS PREVAIL: Arkansas would lose tens of millions in subsidies for low-to-middle income people to purchase health insurance.

As we noted yesterday, some time this month, the Supreme Court is expected to rule on King v. Burwell, a challenge to Obamacare. The lawsuit, pushed by diehard opponents of the health care law, makes a technical argument about the language in the law; if the plaintiffs win, millions of dollars in subsidies and cost-sharing reductions would — potentially almost overnight — stop flowing to states like Arkansas which have federally run healthcare marketplaces (as opposed to state-run; technically, Arkansas has a federal-state partnership, but that sets it up for the chopping block if the plaintiffs win). 

I may dive in to more detail about the lawsuit in subsequent posts, but for now I just want to point out the policy consequences if the plaintiffs prevail. Families USA today released district-by-district maps for the 34 states which would face lost subsidies if the King plaintiffs win, breaking down how many citizens face losing affordable health insurance in each Congressional District. (See above.)

Around 6.5 million Americans would lose subsidies. Many would suddenly not be able to afford the premiums for their health coverage and would have no choice but to go uninsured. (Those who managed to keep their coverage would face a de facto tax increase, amounting to thousands of dollars a year — remember that these are low-to-moderate income people). For context, the average monthly premium for an Arkansan with subsidized insurance is $109; without a subsidy, that shoots up to $398. That's an average hit of more than $1,700 just for the remainder of 2015. 

It gets worse in 2016 — not only would these folks be without subsidies for a full year, but the marketplace will be hit with "adverse selection" as healthy people no longer able to afford their premiums would drop out, leading to higher premiums for everyone else. The combination of these effects — the loss of subsidies and higher premiums in ravaged market — could amount to de factor premium increases of 450 percent. 

And it's even worse for people with lower incomes who currently receive cost-sharing reductions. These would also be nixed in Arkansas if the King plaintiffs win, which would mean folks would suddenly have much higher deductibles and out-of-pocket maximums than what they were promised when they signed up for their plans. 

In Arkansas, the cuts in the wake of a King decision for the plaintiffs would impact around 48,000 Arkansans. You can see the breakdown by congressional district in the graphic above. 

The subsidies could be reinstated with a one-sentence fix by Congress. The chances of this seem slim, though the political pressure will be immense. The other route is for states to move toward a state-run marketplace. Arkansas has already been moving in that direction, albeit tentatively and slowly, but the politics of a King ruling for the plaintiffs would obviously complicate that decision. We'd likely have a repeat of the Medicaid expansion fight, with each state deciding whether to accept Obamacare funding for its citizens or not. 

One difference: the Medicaid fight was over funding for the state's poorest citizens. The folks receiving subsidies include lower-to-middle-income people, who might be better equipped to get the attention of GOP lawmakers (Arkansans making between 138 and 400 percent of the federal poverty level are eligible for the subsidies which King imperils; that's around $16,000 to $47,000 for an individual or $33,000 to $96,000 for a family of four). For various reasons, the population on the Marketplace is likely to grow significantly in the coming years, so this constituency is going to get larger. 

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