Obamacare subsidies stay, to relief of consumers, insurers, other businesses

Thursday's Supreme Court decision, upholding the insurance subsidies for about 6.4 million consumers in 34 states, is a relief to more than those lower-income Americans.

It also helps avert a crisis in the health care and insurance markets that would have sent ripples through the businesses that insure their own workers, experts say.

"We need stability in the marketplace so we can make plans for our own benefits," Annette Guarisco, CEO of the ERISA Industry Committee, said of the major employers the group represents on benefits issues.

There was also concern about the confusion a decision ending subsidies would have created among workers. For example, dependents who bought their own subsidized plans on the federal exchange because it was cheaper than being on a parent's plan, would likely have wanted to get on parents' plans, she said.

Chaos would also have likely ensued if it was left up to Congress to come up with a legislative fix or for state legislatures to approve the establishment of state-run exchanges. The Supreme Court case hinged on whether the subsidies now available to about 6.4 million people were legal as language in the Affordable Care Act specified the subsidies were for people who lived in states that set up their own exchanges, as opposed to relying on the federal HealthCare.gov.

"In the short run, 5 to 6 million would have lost health insurance, which would have been a problem because some states would have scrambled to set up exchanges and other states just wouldn't have," says economist Tal Gross, an assistant professor at the Columbia University Mailman School of Public Health.

He estimated in a report he co-authored this week that every uninsured person in a state costs hospitals an average of $900 a year.

Hospitals have to treat every person who walks into their emergency rooms, regardless of their ability to pay. These uncompensated care costs are subsidized by the federal and state governments and also those who are privately insured.

Still, Obamacare opponents lashed out at the decision, just as Justice Antonin Scalia did in his dissent.

"The court decision is a disappointment for the rule of law and for the states that have fought to keep Obamacare's flawed policies out of their states," said Nina Owcharenko, director of the Center for Health Policy Studies at the Heritage Foundation. "Despite the decision, the problems with Obamacare are real and not getting better."

Officials at Land of Lincoln Health, a non-profit health insurance co-op in Illinois, lauded the decision, saying, "this ruling may prevent some families from having to make the intolerable decision between medical care or food and shelter."

American Medical Association President Steven Stack echoed that sentiment.

"These subsidies upheld today help patients afford insurance so they can see a doctor when they need one and not have to wait until a small health problem becomes a crisis," he said in a statement.

The average American won't have to worry about any dramatic changes to their coverage now that the court has sided with the Obama administration, said Sanjay Singh, CEO of hCentive, which helped launch some successful state exchanges and is working with the federal government on its small business exchange.

"But I would still say it has jolted many states," he said, adding that he expects states led by Democrats to move toward starting their own exchanges to make sure this doesn't happen again.

No state had approved a back-up plan in their state legislature, but many have considered bills that would set up state exchanges so residents wouldn't lose their subsidies and, very often, their insurance. Maine came closest to enacting a law, according to the National Association of State Health Plans, which represents state health policymakers. A bill has been awaiting a final vote in the Senate.

The impact would have gone beyond those receiving subsidies, however. Costs would have risen markedly for people getting insurance through HealthCare.gov, with unsubsidized individual market premiums rising by 47% in affected states — which translates to a $1,610 annual increase for a 40-year-old nonsmoker with a silver level plan, according to researchers from the RAND Corp., a non-profit research and policy organization.

Insurance companies would also have been hard hit.

Many or all insurers could have chosen to leave the market for individual insurance in the states affected rather than to risk facing "significant losses in a quickly shrinking market," said Kaiser Family Foundation's Larry Levitt and Gary Claxton.

Insurers that remain in the market risked being one of the only carriers continuing to guarantee access to coverage to people in poor health, the Kaiser officials say. Insurers that left the market couldn't return to selling individual policies for five years, the Affordable Care Act says.

Many insurers are counting on the marketplaces as an important source of future enrollment growth.

Justin Holland, president and insurance agent at Texas State Financial & Health, says he wasn't surprised by the court's ruling, which he calls "a breath of fresh air for my individual clients."

"Make no mistake: These premiums are high" without subsidies, he says. "I think (this decision) will bring more people into enrollment."

He says some of his group clients expected the ruling to go the other way, but now realize "this law's not going anywhere any time soon."

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