Senior Vice President for Special Initiatives at the Kaiser Family Foundation Larry Levitt, quite possibly the person with the most expertise in Obamacare, likens the Supreme Court's consideration of
King v. Burwell to a potentially deadly
game of chicken. He lays out the consequences, should the Supreme Court make a baldly political decision and gut the law:
• Subsidies would end—likely within a month of a decision, which is expected in late June—for about 7.5 million people who now qualify for them in the 34 states not running their own marketplaces (in the 17 state-based marketplaces, nothing would change and subsidies would continue).
• The premiums these 7.5 million people pay for insurance, would rise from an average of $105 (after taking the subsidies into account) to $374 per month, an increase of 256%.
• People who are sick and know they need insurance would likely work hard to find a way to keep it, but those who are healthy would likely drop it. The ACA's individual mandate—which is the stick to get healthy people to enroll, working hand-in-hand with the carrot of the subsidies—would be largely ineffective. That's because 83% of uninsured individuals who are currently eligible for subsidies would be exempt from the requirement to have coverage because it would be unaffordable without the subsidies.
• The result in affected states would be a classic "death spiral." Premiums would rise, more healthy people would drop their coverage, and that in turn would cause premiums to rise even more. This would destabilize the whole individual market in these states because insurers are required to set premiums within a state based on their entire individual market business, not just people buying through the marketplace.
Those effects aren't likely to be limited to just 34 states, because it will affect the
entire industry. The big insurers participating in the exchanges aren't just in one state, they play nationally. The potentially massive losses they would be subject to in one state could have an impact across divisions. Aside from premiums, this paying customer base disappearing could scare investors away not just from publicly traded insurance companies, but hospitals as well.
The game of chicken gets even more interesting if the court really does end subsidies, because that's when it gets real for Republicans in Congress and in the states. They won't just be feeling pressure from their constituents who are losing insurance, but from their friends in the healthcare industry. That's when this shit could get real for them, since a million or so people losing health care doesn't seem to bother them much.