Texas Has a Lot to Lose in King v. Burwell

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Melissa McChesney

Yesterday the Supreme Court heard oral arguments on the King v. Burwell case. The plaintiffs argued that the Affordable Care Act should be read literally to allow subsidies to be provided only to taxpayers in Marketplaces established by individual states. This would prohibit the Marketplace established by the federal government from providing subsidies, and end all subsidies in the 34 states that currently use the federal Marketplace platform, Healthcare.gov.

Defenders of the law, including the Obama administration, argue that the text, history, and purpose of the Affordable Care Act make it clear that subsidies were always intended to be made available to any eligible individual regardless of whether their Marketplace is set up by the federal government or by a state government.

What’s at stake?

According to studies by the Urban Institute and the RAND Corporation, the potential fall-out from a decision for the plaintiffs could seriously damage individual health insurance markets across the country.  The researchers estimate:

  • 9.3 million people would lose the subsidies for their premiums in 2016 (1.6 million Texans)
  • Young and healthy would likely leave the individual healthcare coverage market, causing premiums for the remaining consumers to increase between 35 percent and 47 percent
  • 8.2 million people would become uninsured because of the resulting unaffordability (1.4 million Texans)

With the loss of the premium subsidies, insurance rates will become more and more unaffordable. Younger and healthier people will leave the markets, further increasing premiums. This process will eventually cause markets in some states to enter a “death spiral,” in which insurance becomes virtually unaffordable.

As the RAND study points out, states like Texas that didn’t create their own Marketplace have a lot to lose if subsidies are eliminated. In general, states that did not create their own Marketplace:

  • Had higher rates of uninsured prior to the passage of the ACA – meaning these states had the most to gain from the availability of affordable healthcare through the ACA; Texas has the highest percentage of uninsured people.
  • Started with higher proportions of the population with low incomes – meaning their enrollees receive larger premium subsidies on average, and so their decisions on whether to have insurance will be more affected by an increase in premium prices; more than half of Texans have an income between 100 percent and 400 percent of the Federal Poverty Level.
  • Were more likely to not expanded Medicaid under the ACA (21 out of the 34 have not yet expanded) – meaning even more low income individuals (people with income between 100 percent and 133 percent of the Federal Poverty Level) in those states are dependent on subsidies to keep their healthcare costs affordable.

Who is most affected?

According to the Urban Institute, the majority of Americans who would become uninsured if the court decides for the plaintiffs are white, non-Hispanics (61 percent). Also, most individuals (62 percent) live in the South since southern states were less likely to set up their own insurance Marketplace. Eighty percent of the adults who would lose insurance are working, with 46 percent working full-time and 35 percent working part-time.

 

Texans lose king v. burwell

U.S. Congress must step up

At this point it is of course unknown what decision will be made by the Supreme Court. The history and purpose of the Affordable Care Act make it clear that subsidies were intended to be made available in all states. However, opponents argue that the literal reading of the law says otherwise.

What is clear is that if the Supreme Court rules to eliminate subsidies for 9.3 million Americans, Congress must step in and act. Without action, the consequences for individuals in FFM states are very big and very real. Much of the coverage gains accomplished by the ACA will be undone. States have the option of setting up their own Marketplaces, however, even in a state with a political will to set up a Marketplace this process would take a long time. Imagine how long it would take in a state like Texas where state leaders have taken every opportunity to show their opposition to the ACA.

There is no question the stakes are high and the consequences are real. If the Supreme Court rules for King, Congress must step in and help protect Americans from losing their health coverage.

Note: this post has been corrected to reflect the following: 9.3 million people would lose the subsidies for their premiums in 2016 (1.6 million Texans), and that 8.2 million people would become uninsured because of the resulting unaffordability (1.4 million Texans)

At the Center for Public Policy Priorities, we believe in a Texas that offers everyone the chance to compete and succeed in life. We envision a Texas where everyone is healthy, well-educated, and financially secure. We want the best Texas - a proud state that sets the bar nationally by expanding opportunity for all. CPPP is an independent public policy organization that uses data and analysis to advocate for solutions that enable Texans of all backgrounds to reach their full potential. We dare Texas to be the best state for hard-working people and their families.

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