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Source: Google Maps

An upcoming Supreme Court decision threatens health insurance subsidies for millions of Americans, and a new study out of the Kaiser Family Foundation shows that if subsidies disappear, people paying for insurance acquired through healthcare.gov in 10 states could see their monthly insurance premiums soar by 335%, or more.

The back-story
In March, the Supreme Court heard arguments in a case challenging the legality of subsidized insurance for residents living in states relying on the federally-run healthcare.gov insurance marketplace.

A strict interpretation of the Affordable Care Act's language has plaintiffs arguing that the ACA only grants the government the right to provide subsidies in states that have set up their own health exchange.

Since the Act doesn't specifically provide for subsidies in states relying on healthcare.gov, a finding in favor of the plaintiffs could kill-off subsidies in the 34 states that opted to use healthcare.gov rather than launch their own website.

The most affected states
According to the Department of Health and Human Services, 6.4 million of the 7.3 million people signing up and paying for health insurance through healthcare.gov as of the end of March received an average subsidy of $272 per month.

If subsidies are eliminated, the resulting increase in monthly premium payment is estimated to be biggest in Mississippi, where premiums are should shoot 650% higher. Monthly premiums are expected to soar by more than 500% in Alaska and Utah, and the 10 states most affected by the decision should see their premiums climb by an average 417%.

Those states that are likely to bear the brunt of a Supreme Court decision eliminating subsidies are also among the states where people earn the least amount of money. Out of the 10 states where premiums are expected to climb the most, seven have median household income that is below the national average, including Mississippi, which is ranked 50th in median household income.

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Source: Kaiser Family Foundation; U.S. Census Bureau

What happens next?
If the Supreme Court does side with the plaintiffs and subsidies are eliminated in these states, then it would require action by either Congress or the state governments to restore them.

Congress could pass a simple one-line fix confirming that subsidies are available to all Americans, not just those living in non-healthcare.gov states. Congress could also kick-the-can by passing bridge legislation that temporarily restores subsidies until after the 2016 Presidential election. Or, Congress could pass a more comprehensive bill that changes the ACA more dramatically, such as by eliminating subsidies to all Americans (not just those in healthcare.gov states).

If Congress fails to act, then states could pass legislation that establishes their own healthcare exchanges, side-stepping the impact of a Supreme Court decision.

It's unclear which, if any, of these options will be taken, but I'd argue that a bridge or state fix is most likely given that polls suggest that opinions regarding Obamacare continue to fall along partisan lines. A separately conducted survey by Kaiser reports that only 38% of Republicans favor a Congressional fix, and that would seem to suggest that Republicans controlling Congress aren't likely to support a permanent and broad-based reinstatement of subsidies. 

 

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