One of the biggest criticisms of ObamaCare is that it doesn’t live up to its promise of being affordable. More than 80 percent of those with coverage through the exchanges are only able to afford coverage because of taxpayer largess – i.e. subsides.
A new report from RAND, a respected nonprofit research organization, finds that without the subsidies, roughly 9.6 million people could lose medical coverage if the Supreme Court rules that subsidies distributed by the federal marketplaces are illegal. As you may know, that is a real possibility, as the Supreme Court has agreed to consider the constitutional validity of the federal subsidies in the King v. Burwell case, which is expected to receive a ruling in the summer.
In addition to the millions of subscribers losing their coverage, RAND predicts that premiums on the individual market would rise by 47 percent on some policies, including that of a hypothetical 40-year-old non-smoker with a silver ObamaCare plan whose premium is now $1,610.
The report underscores how critical subsidies are to the solvency of the ObamaCare system and implicitly makes the damning point that the so-called Affordable Care Act is anything but affordable.
Here’s more on the report:
Eliminating government subsidies for low- and moderate-income people who purchase coverage through federally run health insurance marketplaces would sharply boost costs and reduce enrollment in the individual market by more than 9.6 million, according to a new RAND Corporation study.
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"The disruption would cause significant instability and threaten the viability of the individual health insurance market in the states involved," said Christine Eibner, the study's senior author and a senior economist at RAND, a nonprofit research organization. "Our analysis confirms just how much the subsidies are an essential component to the functioning of the ACA-compliant individual market."
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If the subsidies are struck down, enrollment in the ACA-compliant individual market in the 34 states would drop from 13.7 million people to 4.1 million, according to the analysis. In addition, premium costs for a 40-year-old nonsmoker purchasing a silver plan would be expected to rise from $3,450 annually to $5,060.
Researchers found the effects of ending federal subsidies would be larger in states with federally run marketplaces than in states that run their own marketplaces.
Among the reasons for that difference is that states with federally run marketplaces generally have higher proportions of low-income individuals, who tend to be more sensitive to insurance prices and thus are more likely to drop insurance without subsidies. Those states also had higher uninsurance rates prior to adoption of the Affordable Care Act.
In addition, most of these same states did not expand Medicaid to cover more people as allowed under the Affordable Care Act. This means that there generally are more low-income people buying policies in those states' insurance marketplaces.
If the Supreme Court rules against the federal subsidies, the question will be what will happen to those customers? Would they apply for coverage in states with their own exchanges? And not every state has its own exchange. That would significantly undercut the entire system.
Conservatives and limited government advocates might cheer for that but what happens to all of those Americans who currently enjoy this benefit. Sometimes, nothing motivates people more than when you take their benefits away. Never mind that the benefit was not legal to begin with.
If nothing else, the real price tag for ObamaCare plans will shock those with that coverage into the reality that government is no better at delivering options than the private sector.