The Supremes vs. Obamacare Round II: Will 8 million Americans, and 150,000 Arizonans lose health insurance coverage?

3/16/15 by Alyssa Padilla MPH and Dan Derksen MD

Do you want to see more? See slide deck (PDF).

The Supreme Court of the United States (SCOTUS) refereed round II (King vs. Burwell) of legal challenges to the Affordable Care Act (ACA) on March 4, this time on the issue of subsidies for federally facilitated marketplaces (FFMs). The challengers (plaintiffs) argue subsidies in the form of tax credits apply only to exchanges “established by the state” as per ACA Sec. 1311. If the plaintiffs prevail when the decision is announced in June, 8 million Americans and 150,000 Arizonans could lose health insurance coverage.

The government counters that tax subsidies apply to FFMs because ten pages later, the ACA allows for the Secretary of Health and Human Services (Secretary Burwell) to “establish and operate such Exchange within the state” if there is a state failure to establish an exchange or implement exchange requirements.

Thirty-four states defaulted to using the federally facilitated marketplaces, including Arizona. As of last week, over 10 million Americans selected or renewed plans in those 34 FFM states, with 85% (8.5 million people) receiving federal subsidies to make buying the plans affordable.  Presumably, most of the other 15% not receiving subsidies have a family income exceeding 400% of the Federal Poverty Level (400% FPL = an income of $47,080 for an individual, and $97,000 for a family of four).

The subsidies, in the form of an ‘advance premium tax credit,’ are paid by the federal government directly to the insurer for a qualified individual selecting a plan in a state or federal marketplace.  Across the country, the subsidies cover an average 72% of the premium costs. Rand projects a 70% reduction in nationwide Marketplace enrollment if SCOTUS rules in favor of the plaintiffs.

The 16 states running their own marketplaces (including California, Colorado, Nevada and New Mexico) are in the clear for now. With two ACA enrollment periods complete, Arizona had 33% of its Marketplace eligible population enroll – that means that of 628,000 Arizonans that qualified for Marketplace subsidies, 205,666 enrolled Kaiser.

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