Obamacare tax credits
The Affordable Care Act provides for a federal tax credit for millions of people who have bought individual insurance policies. The credit is the subject of Wednesday’s hearing before the U.S. Supreme Court.
So, what is the tax credit and how does it work?
It’s mostly for people who don’t have insurance from their employers. If that’s you, then you may shop for an individual policy at HealthCare.gov, also known as the Health Insurance Marketplace and, generically, as the “exchange.”
You may qualify for a federal tax credit to help pay for the policy, depending on your income and family size. For example, a family of four with an annual income of $24,250 to $97,000 may receive a premium tax credit. (The former sum, $24,250, is the 2015 federal poverty level for a family of four. The latter sum is 400 percent of the poverty level.) Generally speaking, the lower the income, the greater the tax credit.
The tax credit is known as an “advanceable” credit, meaning you may choose to have the federal government pay it directly to your insurance company to cut your monthly premiums payment. Or you may claim it on your tax return at the end of the year.
The Affordable Care Act on Wednesday faces its second serious challenge in the U.S. Supreme Court: a case that could potentially strip millions of Americans — and hundreds of thousands of Georgians — of their new health insurance.
The court will hear oral arguments today in the case, King v. Burwell, but is not expected to rule until June.
King v. Burwell concerns four words in the more than 900-page Affordable Care Act: “established by the state.” The plaintiffs argue that tax credits created by the health law to help consumers afford their premiums are not legal in 37 states, including Georgia. Those are the states that chose not to create their own health insurance marketplaces, the website where people shop for policies. That is, their insurance marketplace was not “established by the state” but was instead created and at least partially run by the federal government.
A ruling in favor of the plaintiffs, four residents of Virginia, could destroy the tax credits, making insurance unaffordable and causing millions of people to lose coverage, experts say.
“Residents are going to face penalties for being residents of Georgia,” said David Bradford, a health care policy expert at the University of Georgia. “We’re talking about real money for real people who don’t have a lot of money.”
Nationwide, nearly nine in 10 of the 8.8 million people who signed up for 2015 Obamacare plans qualified for tax credits. As of Feb. 15, roughly 537,000 Georgians had applied for marketplace coverage, 90 percent of whom qualified for financial help.
The average tax credit in Georgia at stake is an estimated $3,300 per individual — totaling $1.5 billion statewide, a study by the nonprofit Urban Institute shows.
Obama: no backup plan
The Obama administration says it has no backup plan if the court rules for the plaintiffs and disallows the tax credits. The president told Reuters on Monday, "If they rule against us, we'll have to take a look at what our options are. But I'm not going to anticipate that."
Affordable Care Act critics say Obama is defying the law by giving tax credits to Americans in states with federally run marketplaces.
One of those critics is Georgia Attorney General Sam Olens, who filed a brief with the Supreme Court in favor of the plaintiffs. The drafters of the ACA intentionally excluded tax credits from federally run marketplaces to pressure states into creating their own, Olens said in a statement. When that didn’t work, he said, the president chose to “blatantly disregard the law.”
The case is the most serious challenge to Obamacare since the high court deliberated — and ultimately upheld — the constitutionality of the law in 2012. (The court also ruled that the federal government couldn’t force states to expand Medicaid.)
“I agree that Americans need access to affordable health insurance and quality care, but many Americans are rightly concluding that they are not getting what they were promised,” Olens said.
Georgia is one of six states with a federally run marketplace whose attorneys general filed a brief in support of the King v. Burwell plaintiffs.
It is also one of the states whose citizens and residents have the most to lose.
Georgia is No. 2 in rate of uninsured
Nationwide, Georgia now has the second highest rate of uninsured, at 19.1 percent, second only to Texas, according to a Gallup poll released last month. Indeed, the Peach State’s uninsured rate is now worse than those of Mississippi, Florida, Arkansas and Louisiana, Gallup reported.
Meanwhile, two of Georgia’s Southern neighbors, Arkansas and Kentucky, have experienced the biggest drops in the rate of uninsured in the country. Both states opted to create state-run insurance marketplaces and expand Medicaid, the government health program for low-income Americans.
Some experts say the ramifications of a plaintiff victory in the case would be far more widespread than just hurting individuals with tax credits.
Hospitals and providers would be forced to provide to provide more charity care, which would lead to an increase in prices, they say. It could also dampen the state’s economy by decreasing the amount of discretionary money available to middle- and low-income Georgians.
The market for individual insurance could become unstable, with a projected increase in rates as high as 47 percent, according to the nonprofit research group RAND Corp.
“I think the case is incredibly significant,” said Erin C. Fuse Brown, an assistant professor of law at Georgia State University. “You strike it (the law) down, that’s an activist court by its own definition. People will see it cynically as just a political arm that attempts to make law. It would be extremely radical.”
It would also be necessary, argues Mike Greve, a professor of law at George Mason University who once said the health care law must be killed “as a matter of political hygiene.”
“There’s this notion that it works like a charm and that if it weren’t for the naysayers, it would be a work of art,” Greve said. “But you cannot write a 900-page law that reorganizes a huge piece of the American economy and have it work perfectly. This law as written cannot conceivably work in the long run unless they bend and torture it to make it work. You’d have to do a really, really big rewrite.”
He also said predictions of dire consequences if the court rules for the plaintiffs are overstated. If the court rules that subsidies are illegal in most states, “it would be messy, I’m sure it would be messy,” Greve said, but he insisted that there are ways states and Congress could eventually remedy that.
Deal says states must be ready
Others are not so sure.
“It would be a very upsetting ruling,” said Charles Fried, professor of law at Harvard University who filed a brief in support of the Obama administration. In that brief, he cited several instances in which various justices, including the court’s most conservative ones, argued for the intent of a law and not a strict adherence to a literal interpretation.
Fried said it is hard to predict how the court will rule.
“If this were overturned, there would not be some rapid fix.”
Gov. Nathan Deal said in an interview Monday that he believes the law will be struck down, and that the burden of finding a solution to restore individuals’ coverage could shift to the states even if Congress can reach a compromise with the White House over its future.
“It’s an issue that hopefully Congress will look at, if the ruling goes as many of us anticipate it will — throwing out that portion of Obamacare as unconstitutional,” said Deal, adding: “It will be an issue that will come to the states in very rapid order.”
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