NEW YORK (MainStreet) — Orit Pennington purchased health insurance through the Affordable Care Act (ACA) federal marketplace, because the state in which he lives, Texas, is one of 34 exchanges where the state didn’t form its own healthcare marketplace. Pennington, who owns a labeling and barcode software business, TPGTEX Label Solutions, was paying close to $750 per month for premiums before the ACA was implemented. They were reduced to $275 per month after a credit of $165 under Obamacare. Currently, under a new marketplace plan, Pennington is saving even more money, paying just $101 a month after his credit, a fraction of what he had been paying before the marketplace opened.
But premium prices like that may end soon for the estimated 7.5 million Americans who qualified for subsidies in the 34 states without state-run exchanges. That’s due to a case before the U.S. Supreme Court, King v Burwell, which challenges the legality of subsidies in these states.
If the Supreme Court rules in favor of Burwell, Pennington and millions of Americans can expect to lose their subsidies. (Subsidies would continue in the 17 state-based marketplaces.)
“It will be a great financial burden on us,” says Pennington. “It was very, very difficult before and now it will be just as difficult if not more.”
The pain may come quickly. In commentary at news@JAMA, Larry Levitt, senior vice president for special initiatives at the Kaiser Family Foundation, predicted that subsidies would end, probably within a month of the decision, and premiums for these 7.5 million Americans would rise 256%, from an average of $105 after credits per month to $374 per month.
“It is not simply a matter of calculating the difference between the subsidized and unsubsidized policies -- there are other patient expenses that must be taken into account, such as deductibles, coinsurance and copayments,” says Joel Shalowitz, a clinical professor in health enterprise management at the Kellogg School of Management and professor of preventive medicine at the Feinberg School of Medicine at Northwestern University.
A price hike would be just the beginning of the fallout, according to Levitt. Healthy people would probably drop their coverage, premiums would rise, more healthy individuals would drop their coverage, and as a result premiums would rise more, destabilizing the entire individual market in these states, because insurers set premiums in each state based on its entire individual market, not just those buying through the ACA marketplace, he wrote.
Disaster can be averted if the 34 states create state-based marketplaces, Levitt says.
The ruling is expected in late June.
—Written by S.Z. Berg for MainStreet