Some of the Washington pundits are claiming that if the U.S. Supreme Court upholds the DC Circuit Court of Appeals decision in Halbig v. Burwell Obamacare is done. Not necessarily. In fact, much of the law, and what it does to the health insurance marketplace, would likely remain.
Nothing changes in states with state-created exchanges. The Affordable Care Act says that states that created their own exchanges get the federal health insurance subsidies that lower the effective price of coverage. For the 14 states and Washington, D.C., that did just that, nothing changes. They would still get the subsidies as envisioned by the law.
The other 36 states that did not create their exchanges would not get the subsidies. Without the subsidies, millions of middle-income people would not be able to afford coverage, which would trigger the law’s mandate-exemption provision.
Under that provision, if people cannot find “affordable coverage”—meaning that the lowest cost Obamacare-qualified policy is less than 8 percent of a person’s income (including subsidies if the person qualifies)—they are exempt from the mandate to have coverage and therefore the penalty for not having it. That exemption would affect the large majority of middle-class people in those 36 states who do not have employer coverage.
How many people would be exempted? The current estimate is perhaps 4.5 million (but no one should believe any numbers handed out by the Obama administration). But it will be hard to get an accurate figure, because it would depend on the price of the lowest-cost policy available, which can vary by the age of the applicant, the geographical location, and the number of people covered in the policy. But also the applicant’s income.
And that number could change from year to year, because a family which might be able to find affordable coverage one year may not be able to the next because one of those numerous variables changes (e.g., income goes down, cost of the policy goes up, etc.). Plus, the administration predicted that many more people would be enrolling in the next few years.
Not much changes for higher-income people in the exempted states. Remember that the subsidies only extend to people with incomes up to 400 percent of the federal poverty level (FPL). Obamacare always envisioned upper-middle and upper-income people (who don’t have employer-based coverage) buying their own coverage and paying for it themselves without subsidies. That’s why so many Democrats in Congress had a fit when they realized that a provision in the law meant that they wouldn’t get subsidies from the Federal Employee Health Benefits Program—until the administration conveniently found some wording it could falsely claim allowed the FEHBP to pay most of the premium.
Most of these higher-income workers would be able to find the very expensive “affordable coverage” as defined by Obamacare and so the mandate would still apply to them even in states that did not create their own exchange.
Medicaid will be affected, but only in some instances. If a state created its own exchange and expanded its Medicaid program pursuant to Obamacare, nothing would change.
States that did not create an exchange and did not expand Medicaid would only see a small change compared to the status quo. Former Secretary of Health and Human Services Kathleen Sebelius had arbitrarily ruled that people who would have been eligible for Medicaid under expansion, but who lived in a non-expanding state, would be exempted from the coverage mandate if they were under 100 percent FPL.
Medicaid-eligible workers making above 100 percent FPL in non-expanding states would be able to go into the exchanges and get subsidies. They won’t be able to do that under Halbig. So the ruing would affect some Medicaid-eligible people, but far from all.
Obamacare exchanges in the 36 states will likely implode. About the only reason people would go into Obamacare exchanges is to get the federal subsidies. Otherwise, you would just buy a policy through an insurance agent—which is what millions of Americans have always done.
The “consumer protections”—which require insurers to accept everyone who applies, prohibits from charging more for a preexisting condition, etc.—still apply.
Interestingly, those in the 36 states who would be exempted from the mandate could buy non-Obamacare-qualified coverage, and probably for a lot less than they would be paying in the exchange. So while they won’t be getting the subsidies, in most cases their policies would be more affordable than the “affordable coverage” under Obamacare. Thus, it is unlikely many people would participate in the federally created exchanges.
Halbig would scuttle the employer mandate in the 36 states, but Obama has already done that in all 50 states. Because the employer mandate is tied to the availability of subsidies in the Obamacare exchanges, eliminating the subsidies would eliminate the employer mandate.
But that’s not a new issue because Obama already postponed the employer mandate for one year for all companies, and two years for mid-sized companies. And there are stories about worried Democrats who would support eliminating the employer mandate completely. So Obama has already done, at least temporarily and perhaps permanently, with a wave of his hand what upholding Halbig would do.
Of course, predicting how the Supreme Court will rule, if it takes the case, is a fool’s game. The court often takes unexpected turns (as in Chief Justice John Robert’s bizarre decision upholding the individual mandate in June 2012). But a straightforward upholding of the Halbig decision would only wound Obamacare in some states; it wouldn’t kill it. To do that, Congress will have to act—and a new president would have to sign it.