Health Insurance Marketplace
Established by the Affordable Care Act, the marketplaces are online tools where Americans can compare prices and benefits of dozens of health plans offered by private insurance companies. People can also learn whether they qualify for a tax credit to help lower their monthly premium or are eligible for government health insurance plans, such as Medicaid. The marketplace is aimed mostly at people who don’t get insurance through their employers, such as the self-employed and students. Get more info at www.healthcare.gov
King v. Burwell: The basics
David King and three other plaintiffs, Douglas Hurst, Brenda Levy and Rose Luck, are Virginia residents who do not want to buy health insurance. At issue is the federal tax credit granted to people of certain incomes who shop on the Health Insurance Marketplace, known generically as the “exchange.” In providing for the tax credits, the Affordable Care Act says the credits are for “plans offered in the individual market within a state which cover the taxpayer … and which were enrolled in through an exchange established by the state.”
Those final five words — an exchange established by the state — form the crux of King's case. Georgia, Virginia and 31 other states chose not to create state-based exchanges and instead use the federal exchange to sell plans on the individual insurance market. Therefore, the plaintiffs argue, Virginia shouldn't offer tax credits and they shouldn't have to buy health insurance.
The Supreme Court will hear arguments on the case this spring with a decision expected sometime in June. An estimated 13.4 million Americans could lose their tax credits if the court finds in favor of the plaintiffs, according to the Kaiser Family Foundation. That’s including roughly 275,000 Georgians. Without the credits, experts say many people wouldn’t be able to afford their insurance putting the survival of the federal insurance marketplace at risk.
Helen Holloway, 64, has a heart condition and is no longer able to work. Living with an aunt helps keep expenses down so she can pay off a large medical bill incurred two years ago.
With little money left over, Holloway, like tens of thousands of Georgians, couldn’t afford Obamacare health insurance without a federal tax credit to lower the monthly cost.
“If I had to pay the whole price for insurance, I wouldn’t have it,” she said.
The Atlanta woman will be eligible for Medicare next year when she turns 65. But roughly 275,000 other Georgians could lose their Obamacare tax credits. The Supreme Court in the coming months will hear a lawsuit that challenges the legality of the tax credit in dozens of states, including Georgia.
The credit is a vital tool in the health care law’s aim of insuring millions of Americans by lowering premiums. Without it, experts say, Obamacare could collapse.
In a report this week, a top House Democrat said Americans would lose $65 billion in tax credits if the court agrees with the plaintiffs in the case. The report, by Rep. Henry Waxman, D-Calif., notes that Georgians stand to lose $3.8 billion.
‘Ruling didn’t make a lot of sense’
King v. Burwell represents the second major challenge to Obamacare before the Supreme Court. In 2012, the court upheld the law’s individual mandate, which requires that most Americans have health insurance or face a penalty.
The latest case focuses on four key words: “established by the state.” The plaintiffs argue that only people who live in states that established and run their own insurance marketplaces can get the tax credits. In Georgia and 33 other states, where the marketplaces were created by the federal government, people are at risk of losing the credit and thus, the “affordable” part of the Affordable Care Act.
A ruling on the latest case isn’t expected until June. But if the court rules in King’s favor, the tax credits, which went to 87 percent of Georgians with marketplace plans this year, won’t be available for 2016. No one would have to repay benefits they had already received, but they wouldn’t receive any more unless Congress amends the law.
“The states that continue to do nothing (to run a marketplace), their residents would lose their subsidies,” said Bill Custer, a health policy analyst at Georgia State University. “It’s that simple.
Health insurance and law experts say it’s impossible to predict how the court will rule.
Chief Justice John Roberts surprised conservatives and liberals alike when he wrote the majority opinion in 2012 affirming the constitutionality of the law’s individual mandate. At the same time, the court ruled that the federal government may not force the states to expand Medicaid, which was another pillar of the law.
“I don’t think he wanted to be the one to kill health care reform,” Bob Laszewski, an insurance industry analyst, said of Roberts. “But the ruling really didn’t make a lot of sense. It’s hard to predict where he’ll be on this issue.”
‘Subsidies are an economic fallacy’
Some states with federal exchanges are looking at ways to prevent the loss of tax credits, said Jennifer Tolbert, director of state health reforms for the Kaiser Family Foundation. Illinois state lawmakers, for example, recently met in special session to consider running a state-based exchange. Arkansas has “legislative authority” to establish a state exchange, Tolbert said.
In Georgia, the governor is prohibited by law from starting an exchange without legislative approval; meanwhile, several legislators have voiced strong opinions against the health law.
Rep. Jason Spencer, (R-Woodbine), who sponsored anti-Obamacare legislation earlier this year, said he hopes the court will rule in favor of the plaintiffs and end the tax credits.
“Subsidies are an economic fallacy,” Spencer said. “The more you subsidize, the more expensive what you’re subsidizing becomes.”
While the most obvious consequence would be to leave millions of struggling Americans without insurance once again, a ruling in favor of the plaintiffs would cause premiums for others to skyrocket, experts say.
“It wouldn’t just affect poor people,” Laszewski said. “It would drive the cost of health insurance intolerably high.”
Part of the reason is that insurers would still be required to provide coverage for those people with pre-existing conditions and with serious medical problems, he said. Without tax credits, millions of healthy people would drop out, leaving a risk pool of very sick people — and very high premiums as a result.
“I don’t think people understand that,” he said. “The individual market would crash.”
‘No way I could have afforded it’
Holloway will receive Medicare next year when she turns 65. But for now, she pays pennies for her policy with a tax credit. Without it, even a bare-bones policy, which would not meet her needs because of her heart condition, would cost hundreds of dollars.
Her income is barely more than $1,000 a month, and nearly $250 of that goes to a bill from two years ago when she was hospitalized for her heart condition. She lost her job because she missed so much work and has not been able to find employment since then. Having insurance enables her to go the doctor, receive medications and also to have peace of mind should she have another major incident.
The tax credits are essential for people like Holloway, said Tim Sweeney, health policy director at the Georgia Budget & Policy Institute. Sweeney said he believes the intent of the law is clearly for people to have access to tax credits through federal marketplaces too but that the wording is the issue.
In Georgia, the Legislature could create a state-based exchange so that its citizens can get the credits, Sweeney said. “It’s in the power of the states to fix that.”
As for Holloway, she is grateful for the subsidy that reduced her payment to pennies.
“There is no way I could have afforded it (coverage) if it hadn’t been for that subsidy,” she said. “It made all the difference in the world.”
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