Last June, Celia Maluf took a tumble in her bathroom. Her head smacked against the wall, and her leg slammed down hard on the tile floor. She dragged herself to the emergency room with a concussion and a wrenched knee, and eventually saw several specialists. For an accident that could befall anyone, the ER visit alone cost $16,000, she estimated.
Yet Maluf described herself as fortunate. The incident would have been calamitous had it occurred more than four months earlier, before her health insurance kicked in for the first time. The highest bill Maluf herself had to pay for medical treatment after the fall amounted to $57.86. The insurance was also affordable because Maluf, a 60-year-old self-employed Pilates instructor in Miami, qualifies for government subsidies that reduced her monthly premium to $187.54.
That could soon change. Any day this month, the Supreme Court is expected to issue a decision with the potential to revoke those subsidies. The relevant case, King v. Burwell, challenges the legality of granting subsidies to residents in 34 states who buy health insurance on a federal exchange, and it is based on four words in the 900-page Affordable Care Act, the federal healthcare law commonly known as Obamacare.
Such subsidies are available to people purchasing insurance on an “exchange created by the State,” the law reads. But a court ruling for the plaintiffs, even if it includes a temporary fix, could create a yawning divide between states and split the country into a two-tiered system, healthcare experts say.
“You’d see a situation in which a large number of states around the country have a much less generous health insurance system than others,” Michael Sparer, a professor of health policy and management at the Mailman School of Public Health at Columbia University in New York, said. “You’d have an increasingly inequitable health insurance system in the United States.”
Without subsidies, 8.2 million people across 34 states would be unable to afford health insurance, and the price of monthly premiums for people buying insurance on their own in those states would jump by an average of 35 percent, the Urban Institute has estimated. But in states that run their own exchanges, subsidies and the cost of premiums would be left relatively intact.
Signed into law in 2010, the Affordable Care Act aimed at reducing the ranks of uninsured Americans by making healthcare coverage more accessible and more affordable, in part by offering subsidies to offset the cost of insurance to those who qualify. But the law has encountered fierce ideological resistance from Republicans, and the case of King v. Burwell, the most recent conservative attempt to dismantle the law, jeopardizes the financial assistance that is vital for millions.
Since hearing oral arguments in the case in March, justices have said little to tip their hands about how they’ll rule in the case. Still, few expect the court to dismiss subsidies without demanding a stopgap measure to give states, the federal government or Congress time to devise an alternative.
Should the court revoke those subsidies, however, the Obama administration has implied it has little recourse to reinstate them. Meanwhile, Republicans in Congress have been quick to rule out a permanent legislative fix, although some have proposed taking action to prolong subsidies for the near future.
Even with a temporary reprieve, if states are ultimately left with no choice in the long run but to establish exchanges for residents to qualify for subsidies, some predict dire consequences. Between those states that have their own exchanges and those that don’t, “the gap would be quite extreme,” Linda Blumberg, a senior fellow at Health Policy Center at the Urban Institute, said.
The Ripple Effect
Roughly 7.7 million people, or 87 percent of those who signed up for a plan through HealthCare.gov in 2015, qualified for subsidies averaging $263 per month, a report issued by the Department of Health and Human Services noted in March. Without subsidies, the cost of monthly premiums for health insurance would vary by state, but in some places could jump by hundreds if not more than $1,000 per month. In New Jersey, which uses the federal exchange, subsidized insurance costing a family of four $400 a month could soar to $1,675 per month without subsidies.
Those losing their subsidies would not be the only people affected, however. The Urban Institute found that 1.2 million people who don’t receive subsidies would also be unable to afford more expensive premiums, a direct consequence of ending subsidies for everyone else.
If people who need the subsidies lose that help, young and healthy people are far more likely to drop coverage, while sicker patients who require more expensive care will keep it. “Premiums in an insurance pool are determined by the characteristics of all people in it, whether they’re getting subsidies or not,” Blumberg explained. Because the people still left buying insurance would be the less healthy ones, “the premiums go up for everyone.”
That domino effect is precisely what the Affordable Care Act has tried to avoid triggering.
So when people don’t have health insurance and they become ill or have accidents, where do they go for medical care? They head to the emergency room or clinics that offer care free of charge for people who cannot pay. Those services are free to the patient, but they can’t necessarily offer the immediacy of care that an insured patient would receive.
That scenario is one that Patricia Weber, a 22-year-old full-time student at Valencia College and part-time pet sitter in Ocoee, Florida, knows all too well. In February 2014, not long after her mother was financially unable to keep Weber on her insurance plan, Weber began having serious health issues.
“I couldn’t keep anything down,” she recalled. The vomiting was so severe that at one point she was throwing up continuously for nine hours. It turned out she needed surgery on her gallbladder, but without insurance, the procedure was too expensive. She went to a free clinic, Shepherd’s Hope, which sends patients that need surgery or complex care to partner hospitals, but because it was charity care, Weber would have to wait until the end of April 2014 to get surgery. Either that, or she could try to qualify for subsidized insurance through the Affordable Care Act. For weeks, she subsisted on chicken broth and bread, growing weaker. She said she even considered eating something that would send her into emergency surgery. Then, Obamacare came through. On April 2, 2014, she went into surgery.
“If subsidies were not around, there’d be no way that I could afford healthcare,” Weber said. “I have a lot of health problems and issues. I’ve had four surgeries in the last year. For me, it’s a very big deal.”
Hitting States Hard
Losing subsidies would not deal a blow solely to people like Weber or Maluf. It would also hurt state healthcare systems, a loss compounded by the fact that many of the states that did not set up their own exchanges also chose not to expand Medicaid, the federal insurance program for low-income people that would have brought in more federal dollars.
States that eschewed expanding Medicaid not only have more uninsured people but also less funding for the type of safety net care -- emergency rooms, free clinics -- that such people rely on. Because the Affordable Care Act gave states the option to reduce rates of the uninsured by expanding Medicaid, the law also reduced federal dollars distributed to hospitals treating uninsured people.
“If a lot of people lose their subsidies and their insurance, it’s going to put more pressure on hospitals, if the federal and states governments don’t step up and fill the revenue vacuum,” Evan Saltzman, a doctoral student in healthcare management at the Wharton School of Business of the University of Pennsylvania, said.
Overall, hospitals and doctors in states that use the federal exchange could lose $9.7 billion in revenue in 2016 from people who -- thanks to subsidized insurance -- pay them for checkups, surgeries, sick visits and other medical care, the Urban Institute found.
Those in states with their own insurance exchanges, however, would be more or less unaffected. “I think very little would change in those states,” Sparer, the Columbia professor, said.
But while hospitals have the option of raising prices to cover the gap, patients who lose their subsidized health insurance will have few alternatives to make up for the difference in access. That means the fate of one’s medical care could become a matter of luck, linked to the state in a person’s address.
“We should be happily busy working, and not worrying,“ Maluf, the Pilates instructor, said of the possibility of losing subsidies. “Imagine how I feel right now, that I have benefits being threatened, because I live in Florida.”