A looming Supreme Court case threatens to lead to millions of people leaving individual market health insurance plans—and to very steep price hikes for people remaining in those plans, two new analyses find.
The studies released Thursday by the Rand Corp. and the Urban Institute suggest that two-thirds of the U.S. individual insurance markets—which sell health coverage to people who don't get insurance through their employers—could be crippled, if not wrecked by a court decision that goes against the Obama administration.
Rand's study found that a total of more than 9.6 million people would leave the individual health insurance rolls in 34 states served by HealthCare.gov, the federal Obamacare exchange, if the Supreme Court rules subsidies issued through that marketplace are illegal under the Affordable Care Act.
Without such subsidies, many people would find their monthly premiums unaffordable.
"This decline includes plans sold in the [government-run Obamacare] marketplaces and those sold outside of the marketplaces that comply with ACA," the study said.
Rand also projected that individual insurance premiums in those states would leap by 47 percent if the subsidies are yanked by a high court decision. Rand cited as an example a jump that would translate into a 40-year-old nonsmoker enrolled in a so-called silver plan paying an extra $1,610 in premium payments annually.
The estimated price increase stems from the fact that many people, particularly the younger and healthier, would stop buying insurance if they no longer received subsidies through HealthCare.gov, leaving a disproportionate of older, sicker enrollees in the plans, and using health benefits.
"The departure of young and healthy people from the health insurance market would cause premiums to rise further, leading to a cycle of additional departures and further premium increases," the study said.
Christine Eibner, a Rand senior economist and the study's senior author, said, "The disruption would cause significant instability and threaten the viability of the individual health insurance market in the states involved."
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"Our analysis confirms just how much the subsidies are an essential component to the functioning of the ACA-compliant individual market," Eibner said.
In its own study, the Urban Institute found that by 2016, the number of people without insurance in HealthCare.gov states would increase by nearly 8.2 million if the Supreme Court ruled that HealthCare.gov customers cannot get financial assistance to help pay their premiums and out-of-pocket expenses. That financial aid would be worth an estimated $28.8 billion in those states by 2016.
Texas alone would see 1.4 million fewer insured residents, and there would be more than 1 million Florida residents without insurance if the court's decision wiped out the subsidies, according to the Urban Institute.
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And "average premiums in the nongroup [individual] market would increase by an estimated 35 percent," the Urban Institute brief said. In dollar terms, that means that average nongroup premiums would go up $1,460 per year, from $4,130 to $5,590, according to the study, which was funded by the Robert Wood Johnson Foundation.
"The Supreme Court's decision will have far-reaching effects on the number of uninsured Americans and premiums," said Andrew Hyman, senior program officer at the foundation.
"The court's decision could significantly undermine the stability of insurance markets in dozens of states, which will impact those who are covered as well as the remaining uninsured," Hyman said.
The two analyses were spurred by the Supreme Court's decision to hear a case challenging the HealthCare.gov subsidies. Oral arguments in the case known as King v. Burwell are set for March.
The subsidies on the exchange help reduce monthly premiums—often significantly—when income falls between one and four times the federal poverty level. In 2014, the federal poverty level for a family of three was just under $19,800.
Plaintiffs in King v. Burwell argue that the subsidies cannot be given to HealthCare.gov customers because the Affordable Care Act does not explicitly talk about granting financial assistant through a federally run Obamacare exchange, while it does explicitly do so for customers of exchanges run by individual states.
The Obama administration has scoffed at that argument, saying the overall language of the ACA authorizes HealthCare.gov subsidies, and that the law has long been understood as designed to reduce the number of people without health insurance nationwide, regardless of who operates the exchanges.
The Supreme Court case does not threaten the legality of subsidies given to customers of state-run exchanges.
A decision in the case is expected in June.