How many could lose coverage?
Published 12:00 am Tuesday, March 10, 2015
- Doug Mills / The New York TimesObamacare supporters demonstrate outside the Supreme Court in Washington, D.C., last week.
So how many people in how many states could be affected by the big Supreme Court case about Obamacare’s insurance subsidies? Good question.
A combination of data problems and legal ambiguities make some basic facts about the case difficult to summarize easily. Last week, news media coverage included widely ranging numbers of people who could lose their insurance and where they live. Here’s why it’s hard to estimate.
The court case, King v. Burwell, concerns whether subsidies can go to insurance purchasers in every state or just those where a marketplace was established by a state government. If the court rules only state marketplace customers can keep getting the money, it’s not entirely obvious which states will qualify.
There are 13 states, along with the District of Columbia, that have submitted applications to manage their own marketplaces and are now doing all the work that the health law and regulations say they must to have a state-based marketplace. Everyone agrees that the court case will have no impact there.
There are three states —New Mexico, Nevada, and Oregon — that also had their plans to run their marketplaces conditionally approved. But those states failed to set up all of the exchange-running functions and now rely substantially on the federal government to help them.
That leaves 34 states that are considered part of the federal marketplace system. The briefs and oral arguments before the Supreme Court used the number 34. But the cases actually date to 2014, when the state lineup was slightly different. And the D.C. Circuit Court of Appeals found, in a similar case, that 36 states could be affected by the ruling. How the three in-between states are treated will most likely depend on the details of the court’s ruling and the administration’s regulatory response.
There are also optimists who think that, with some regulatory tinkering, the Obama administration could wave through a few more states that are running most of their exchange functions but have not officially applied to become state-based. That means there is a slight chance that the decision could come to affect fewer than 34 states.
To reflect that uncertainty, we have been saying the case could affect residents of up to 37 states, though many experts think that 34 states is the most likely number.
The sign-up period just ended last month. The administration has published a total number of people who selected health plans — 8.8 million in 37 states — but not the number of them in each state or the percentage in each state who are getting subsidies to help them pay their premiums. Using older estimates of both things and doing a little math, the Kaiser Family Foundation calculated that about 7.5 million people in 34 states have picked plans and qualify for subsidies.
Picking a plan is not exactly the same thing as having insurance and getting an Obamacare subsidy. Last year, about 15 percent of the people who signed up either never paid their premiums or dropped out of coverage after a few months. The dropout rate will probably be lower this year, but experts expect that the number of people actually enrolled in coverage will be smaller than the sign-up numbers.
To reflect that uncertainty, we have been saying about 7 million people could lose subsidies if the court rules against the government, but other estimates are defensible.
Some people who would lose subsidies if the court rules against the government would immediately drop coverage. Others would keep paying for insurance even if their premiums went way up. If the subsidies disappear this year, there will be huge price spikes for subsidized customers this year.
But there is also a risk in the years that follow. Insurance companies, aware that poorer, healthier consumers will leave the market, will increase prices further, leading to a dynamic that some people call a death spiral. Those escalating prices mean that even people who are getting no subsidies this year will probably drop out next year. And many of the millions of new customers who are expected to sign up probably won’t if the court rules against the government.
Two research groups have developed complex economic models that try to predict how various people will react when prices in the marketplace change. The models, one from the RAND Corp. and one from the Urban Institute, compare scenarios for 2016 in which the law proceeds without change with one in which subsidies are eliminated in 34 states. Both models estimate that about 8 million fewer people will be insured if the court rules against the government. But there is great uncertainty about whether those models predict the future precisely. Economists expect such models to have wide bands of uncertainty, meaning the number could be substantially larger or smaller.
Those numbers also, of course, assume the policy environment doesn’t change after the court rules, and that neither Congress, the administration nor state governments act.
We have been saying the number of uninsured Americans is estimated to rise by about 8 million people in 2016 if the court rules against the government. But this is the estimate with the greatest uncertainty of all.