Obamacare case's threat to small biz workers ain't small

They work for small businesses, but they'd be the biggest hit by far if this Supreme Court case goes against the Obama administration.

Millions of people in families with small business employees or self-employed workers would drop health insurance coverage if the high court rules HealthCare.gov customers can't get financial help for their Obamacare plans, a Senate committee is being told Wednesday.

A medical assistant administers a phenylketonuria (PKU) test to an infant at a health center in Greenbelt, Maryland.
Andrew Harrer | Bloomberg | Getty Images
A medical assistant administers a phenylketonuria (PKU) test to an infant at a health center in Greenbelt, Maryland.

Not only would subsidies disappear for millions in 34 states, but premium prices would skyrocket as customers dropped coverage, leaving many nonsubsidized people unable to afford the plans, Urban Institute senior fellow Linda Blumberg said in prepared remarks to the Senate Committee on Small Business and Entrepreneurship. Her statement was provided to CNBC.

Blumberg said that exodus of customers also could hurt small businesses in the states that would be affected by such a ruling by putting them at a competitive disadvantage for hiring with larger firms that offer job-based health coverage, as well as with small firms in states not covered by the decision.

Blumberg's prepared testimony comes about two months before the Supreme Court is expected to rule in the King v. Burwell case.

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Plaintiffs claim that the Affordable Care Act does not allow tax credits to be given to customers of a federally run Obamacare exchange such as HealthCare.gov to help them pay for their insurance premiums. Citing explicit language in the ACA, they argue that only an exchange established by a state can sell subsidized coverage.

The claim, which the Obama administration strongly disputes, is significant because nearly 90 percent of people who buy coverage through HealthCare.gov or one of the 14 exchanges run by a state or the District of Columbia get a subsidy to help pay their monthly premiums.

The subsidies, available to people who earn between 100 and 400 percent of the poverty level, can greatly reduce the cost of insurance. A subset of low-income customers also get financial help paying their out-of-pocket health costs.

Earlier analysis by the Urban Institute found that an estimated 8.2 million people in HealthCare.gov states would become uninsured if the Supreme Court rules the subsidies are illegal.

Blumberg, in her testimony, said that 4.1 million people in families with a small business employees would become uninsured as a result of a negative court ruling.

About 840,000 others in these families would become uninsured because their premiums would jump an average of 55 percent, she said.

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And 1.6 million people in families with a self-employed person would become uninsured if their subsidies went away, Blumberg said. In addition, another 360,000 people in self-employed families would drop coverage as a result of rising premiums.

The tallies cannot be added together because of overlap between small business and self-employed families.

But, Blumberg told CNBC, "I'm presuming the overlap is pretty small."

And she noted that the 4.1 million subsidized people in small-business families alone represent half of the national tally that would lose coverage as a result of an adverse Supreme Court ruling.

"Small firm employees, the self-employed and their family members" have disproportionately benefited from the Affordable Care Act, Blumberg said in her prepared statement.

As a result, "they would be disproportionately harmed due to the destabilization of these markets," Blumberg said.

Before the Affordable Care Act began taking full effect in late 2013, small businesses were much less likely to offer health insurance plans to workers than larger companies. In 2013, more than 93 percent of companies with 100 to 999 workers offered health coverage to employees, compared with just 32.3 percent with fewer than 25 workers.

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And businesses with fewer than 50 full-time workers are not covered by Obamacare's so-called "employer mandate," which as of 2016 will require all firms with at least 50 workers to offer insurance or pay a fine.

But many small-business workers and the self-employed since late 2013 have been able to buy subsidized individual health insurance plans on government-run Obamacare exchanges.

As a result, the uninsured rate among nonelderly workers at firms with fewer than 50 employees fell from 23.5 percent in June 2013 to 13.2 percent by last month. And the uninsured rate among self-employed workers fell from 30.4 percent in mid-2013 to 19.6 percent last month.

Small business and self-employer workers who earn less than 250 percent of the poverty level have seen even bigger decreases in their uninsured rate.

Before Obamacare, nearly 45 percent of self-employed workers in that income bracket did not have health insurance. Now, it's 28.6 percent.

More than 38 percent of lower-income workers at businesses with fewer than 50 workers were uninsured prior to Obamacare. That rate fell to 22.3 percent as of last month.