Health Insurance

Obamacare prices to skyrocket if high court kills subsidies

Nearly 7.5 million people who get financial help to buy insurance would face average premium price hikes of a whopping 255 percent if that aid is ruled illegal in a pending Supreme Court case, a new analysis finds.

And that's just the average price increase across 34 states served by the federal Obamacare health insurance exchange.

On the low end, the Avalere Health consultancy found, customers in Arizona would face effective average price increases of 122 percent for their coverage. At the other extreme, subsidy-eligible customers in Mississippi would face an average price hike of a sky-high 774 percent.

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The second-highest effective rate increases would come in Alaska, where Obamacare customers could see average price increases of 449 percent, Avalere found.

People sit with an insurance advisor as they sign up for Obamacare in Miami.
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The actual prices of the monthly plans would not change if the subsidies are taken away from customers, but customers would have to pay, as a rule, significantly more out of pocket for that coverage if the financial aid is ended. That could happen as early as this summer if the Supreme Court says the aid isn't allowed under the Affordable Care Act.

Avalere CEO Dan Mendelson said Thursday that those kinds of sharp price spikes his company identified would be met by a mass exodus by customers from their existing Obamacare plans.

"We expect to see virtually all stakeholders aggressively seek alternatives to preserve continuity of care" if the Supreme Court rules for the plaintiffs in the case known as King v. Burwell, said Mendelson.

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He noted that the premium increases projected by Avalere's analysis would primarily affect relatively low-income populations of states whose governments are controlled by Republicans, because those are the bulk of customers.

10 million left on sidelines?

The Urban Institute recently estimated that almost 10 million fewer people would be covered in the individual insurance plan market if the subsidies are eliminated for customers, largely due to people ceasing to buy insurance altogether because it would no longer be affordable.

Nearly 9 out of every 10 Obamacare customers nationally gets federal tax credits to help pay for their monthly insurance premiums. The subsidies are available to households that earn between one and four times the federal poverty level, or $23,850 to $95,400 for a family of four.

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In the Supreme Court case set to be orally argued next Wednesday, plaintiffs claim such financial aid cannot be granted to customers of a federally run Obamacare exchange such as because the ACA does not, as written, authorize those subsidies.The plaintiffs say the ACA only explicitly authorizes those grants for customers of Obamacare exchanges run by an individual state.

The Obama administration rejects that argument as absurd. And for now, the administration is leaving it to Republican opponents of Obamacare in Congress to decide if they will come up with a plan to deal with the potential loss of affordable insurance plans for most customers.

The Avalere analysis comes after Health and Human Services Secretary Sylvia Burwell told Congress that the Obama administration has no contingency plan if it loses the case.

"We are confident that we will prevail" at the Supreme Court "because the text and structure of the Affordable Care Act demonstrates that citizens in every state would be entitled to tax credits, regardless of whether they purchased their insurance on a federal or state marketplace," Burwell wrote Congress in a letter Tuesday

"While we are confident in our position, a decision against the Administration in the King case would cause massive damage," wrote Burwell, citing the fact that millions would be unable to afford their plans, healthy people would be much less likely to buy insurance and states that were not operating their own Obamacare exchange would see insurance costs rise to deal with the effects of more uninsured people receiving uncompensated hospital care.

"We know of no administrative action that could, and therefore have no plans that would, undo the massive damage to our health-care system that would be caused by an adverse decision," she wrote.

Actuaries request action

Also Tuesday, the American Academy of Actuaries asked Burwell to consider allowing insurance plans to submit premium rate requests that are contingent on possible outcomes of the Supreme Court case, or to allow plans to revise their submissions after the high court rules.

The actuaries argue that such flexibility is necessary because 2015 rates, which assume the availability of the subsidies, are already in place, while 2016 rates would be submitted before the Supreme Court is expected to rule in late June.

The group of actuaries, who determine what premiums plans should charge customers, in its letter to Burwell warned that "eliminating subsidies in [] states would likely result in significantly fewer individual market enrollees and higher average health-care costs."