Much at Stake for Georgians in Health Care Fight

By Erin C. Fuse Brown

After the oral argument on March 4, it remains unclear what the U.S. Supreme Court will decide in King v. Burwell, the latest case challenging the Affordable Care Act. What is clear is that a decision striking down subsidies for all those who obtain insurance on federal exchanges would have ripple effects throughout the economy.

Georgia is one of 34 states that relies on the federal government to run its health care exchange. About a half million Georgians will lose their subsidies and, therefore, their health coverage if the U.S. Supreme Court rules in favor of the challengers.

The legal question before the Court is whether people can obtain health insurance subsidies on exchanges run by federal government in states that do not set up their own.

Challengers argue the subsidies are not permitted because of a provision of the ACA that provides tax subsidies to people who purchase insurance through an “exchange established by the state.” They argue that this means subsidies are not permitted in exchanges where the federal government operates “such exchange” because the state has declined to do so. The government argues it is clear that Congress intended to provide subsidies in state and federal exchanges, when the provision read in the context of the rest of the statute.

The question for the Supreme Court is one of statutory interpretation and whether  to strike down or defer to the Internal Revenue Service interpretation, which provides subsidies to all those on state and federal exchanges.

A Supreme Court decision that strikes down federal exchange subsidies would have grievous consequences for patients, providers, and the stability and affordability of health insurance.

Millions of people who gained coverage under the ACA will lose access to health care. Nearly 8 million people would lose their subsidies nationwide, and most of these individuals would become uninsured. Even those who do not receive subsidies will be affected, because health insurance premiums in the nongroup market would jump up to 45 percent from current levels.

Those who continue to purchase coverage without subsidies will likely be sicker than those who drop coverage. When healthier people drop out of the insurance market, this drives up premiums and leads to what is known as a health insurance death spiral. A decision against the government would decimate the health insurance market in all states with federal exchanges.

Hospitals and other medical providers, too, will be pinched as individuals lose their health insurance. Hospitals and providers were just starting to see their uncompensated care figures improve as more people gained coverage under the ACA. This trend will reverse if people lose insurance coverage due to the loss of subsidies. Meanwhile, hospitals are seeing significant cuts to federal reimbursements under Medicare and Medicaid, and many cannot afford to lose the offsetting revenues from increases in privately insured patients from the exchanges.

If the Supreme Court rules that there are no subsidies available on the federal exchanges, there are two potential routes to avoid these negative effects, but both are politically fraught.

Congress could pass a simple, technical correction to the ACA to allow subsidies on the state or federal exchanges. The Republican-controlled Congress is unlikely to agree to any fix to Obamacare, no matter how small the correction.

Second, states with federal exchanges like Georgia could take steps to establish a state exchange, perhaps even continuing to use the federal exchange as a technological backbone. But states need considerable lead time to establish an exchange.

Under a state law passed in 2014, Georgia would require legislative enactment to establish a state exchange. With the opinion not expected from the Supreme Court until June, the soonest the Georgia General Assembly could consider the issue would be in the 2016 session, long after the consequences hit individuals, the insurance market and providers in Georgia.

Erin C. Fuse Brown, assistant professor of law, is a faculty member of the Center for Law, Health & Society. Her research interests are in the intersection of the business and regulation of health care delivery systems. Her recent scholarship has focused on policies affecting hospital prices for health care services and on the structural fragility of the right to health care in the Affordable Care Act.