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June 24, 2015

Decision For King Paves Way For More Affordable Health Care Plans, $700 Billion In Taxpayer Savings

 

DALLAS – The U.S. Supreme Court will soon release its decision regarding the second biggest legal challenge to Obamacare. And while a win for the plaintiffs in King vs. Burwell won’t kill the law, it could make it largely unworkable in 34 states by eliminating federal subsidies for those states that did not set up their own health insurance exchange, said Merrill Matthews, Ph.D., resident scholar with the Institute for Policy Innovation (IPI).

“The administration has decided to hand out the subsidies to Obamacare enrollees in every state anyway, in complete disregard for the law—hence the legal challenge,” said Matthews. And there are several reasons to think this challenge will succeed.

  •  Justices on both sides of the political spectrum have increasingly emphasized that they will not override the clear language of a law, regardless of what Congress intended to do.  
  • Congress frequently uses subsidies to persuade—read, bribe—the states into doing what Washington wants (e.g., highway speed limits and Medicaid expansion).  
  • It is abundantly clear what the Democrats writing the law originally intended thanks to MIT economist Jonathan Gruber, who played a major role in shaping the law as a paid adviser, because he explained to audiences on several occasions that subsidies depended on states creating their own exchanges.

While a Supreme Court victory for King doesn’t eliminate Obamacare and would likely have little impact in the 16 states that created their own exchanges, there would be both positive and negative impacts in the other 34, said Matthews.

“On the plus side, taxpayers would save an estimated $700 billion over a decade from fewer insurance subsidies. And because the insurance mandate depends on subsidies to make coverage ‘affordable,’ (1) businesses in those 34 states that don’t provide coverage would be exempt from the penalty, and (2) most middle-income people would be exempt from having to buy coverage.”

“On the negative side, a King decision would mean an estimated 6.4 million people in those states would no longer receive federal help paying for health insurance. And that means millions of them will drop their coverage because Obamacare is so expensive,” said Matthews.

However, to fill the coverage gap, insurance companies may offer cheaper limited-benefit plans that don't meet Obamacare's minimum coverage mandate. Thus the millions who may lose their subsidy could actually be able to buy a much more affordable policy.

Furthermore, said Matthews, Obamacare has been funneling billions of dollars to the health care industry, but much of that funding could end if the Court rules for King, and could send health care stocks into a tailspin.

“The best solution in light of a King victory would be for Obama to finally sit down with Republicans to hammer out changes that would actually increase access to health care, lower costs and improve quality—all the things Obama promised his law would do but didn’t,” said Matthews.

 

Institute for Policy Innovation (IPI) resident scholar Merrill Matthews, Ph.D. is available for interview by contacting Erin Humiston at (972) 874-5139, or erin@ipi.org

 


 

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