'Ugly' potential fallout from Supreme Court health care case

Ruling may gut 'Obamacare,' but Republicans would feel the heat if millions lose subsidies

by Ricardo Alonso-Zaldivar

A Supreme Court ruling due in a few weeks could wipe out health insurance for millions of people covered by President Barack Obama's health care law. But it's Republicans — not White House officials — who have been talking about damage control. A likely reason: Twenty-six of the 34 states that would be most affected by the ruling have Republican governors, and 22 of the 24 GOP Senate seats up in 2016 are in those states.
Obama's law offers subsidized private insurance to people without access to it on the job. In the court case, opponents of the law argue that its literal wording allows the federal government to subsidize coverage only in states that set up their own health insurance markets.
Most states have not done so, because of the intense partisanship over "Obamacare" and in some cases because of technical problems. Instead, they rely on the federal HealthCare.gov website.
If the court invalidates the subsidies in those states, an estimated 8 million people could lose coverage. The results would be "ugly," said Sandy Praeger, a former Kansas insurance commissioner.

"People who are reasonably healthy would just drop coverage," she said. "Only the unhealthy would keep buying health care. It would really exacerbate the problem of the cost of health insurance."

Praeger, a Republican who retired this year, called it "a classic death spiral," using a term for market collapse.
Oral arguments on March 4 revealed a divided court. Chief Justice John Roberts and Justice Anthony Kennedy seemingly are key to the outcome, which won't be known until late June.
If the subsidies survive, the Affordable Care Act will look like settled law to all but its most passionate opponents. But if they are overturned, the shock could carry into next year's elections. Some potential consequences:
BAD TIMING
Around the time when the court announces its decision, insurers will be working to finalize premiums and plans for the coming year. Contracts with the government for 2016 health law coverage have to be signed by early fall. If the subsidies are overturned, insurers would have to tear up their projections about markets in more than half the states.
Populous states such as Texas, Florida, Ohio, Illinois, New Jersey, Georgia and Pennsylvania would be among those affected.

State lawmakers could mitigate the impact by setting up their own insurance markets, or exchanges. But that can't be done overnight.

States might try authorizing an exchange, and then contracting with the federal government to run it. But that sort of end run might prompt lawsuits from opponents of the law.
In any case, most state legislatures will be out of session by the summer.
During arguments, Justice Samuel Alito raised the possibility that the court might be able to delay the effective date of its decision. Even a delay through the end of this year wouldn't buy much time. Enrollment for 2016 health law plans is scheduled to start Nov. 1.

HOUSE OF CARDS

The health law was designed as a balancing act. Insurers can't turn people away because of health problems, but most healthy people are required to contribute to the insurance pool, and the government subsidizes most of the premium for low- to middle-income households.

Take away subsidies, and the other two parts become unstable.

The law's requirement to carry insurance, never popular, would probably become the biggest target for repeal.

"My guess is there would be overwhelming political support for the elimination of the individual mandate if people can't afford the premiums," said former Sen. Tom Daschle, D-S.D., who was an influential Obama adviser on health care.

Insurers would demand relief from provisions of the law intended to limit premium increases, or they might drop out of the insurance exchanges.

STICKER SHOCK FOR SELF-PAY CUSTOMERS

Many people still buy individual health care policies directly from an insurance company, bypassing the law's markets and paying the full cost. They tend to be small-business owners, self-employed professionals and early retirees.

But even they would not escape the tumult in states losing subsidies.

The health law created one big insurance pool in each state, combining customers who purchase their policies directly with those who buy through the government market. If healthy people exit the insurance exchanges in droves, premiums for those buying directly would go up. Some may be unable to afford the higher cost.

"It would set off cascading events," said Larry Levitt of the nonpartisan Kaiser Family Foundation. "The individual market would empty out as premiums rise significantly."