The Consequence The Supreme Court Obamacare Challenge
As a result, the elimination of the subsidies would destabilize the individual insurance markets in states not running their own marketplaces. Under the ACA, insurers would still be required to guarantee access to coverage irrespective of health status and prohibited from charging sick people more than healthy people. Even without the subsidies, many people who are sick would likely find a way to maintain their insurance in the face of substantial premium increases. However, people who are healthy would likely drop their insurance.
Insurers in the affected states would immediately find themselves in a situation where premiums revenues were insufficient to cover the health care expenses of the remaining enrollees, who would be far sicker on average than what insurers assumed when they set their premiums for 2015. This would trigger a classic adverse selection “death spiral,” where insurers would seek very large premium increases, which in turn would cause the healthier of the remaining enrollees to drop coverage.
These effects would occur for all ACA-compliant individual insurance products both inside and outside of the marketplaces in affected states because insurers are required to pool all of their individual enrollees when establishing premiums.
Nicholas Bagley argues that these consequences are enough that the court should consider them reason enough to rule to uphold the subsidies. Let’s hope the Supremes agree.
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Copyright 2015 Liberaland
By: Stuart Shapiro
Stuart is a professor and the Director of the Public Policy
program at the Bloustein School of Planning and Public Policy at Rutgers
University. He teaches economics and cost-benefit analysis and studies
regulation in the United States at both the federal and state levels.
Prior to coming to Rutgers, Stuart worked for five years at the Office
of Management and Budget in Washington under Presidents Clinton and
George W. Bush.
3 responses to The Consequence The Supreme Court Obamacare Challenge
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illinoisboy1977 March 4th, 2015 at 11:13
When ruling on a case, a court cannot concern itself with the consequences of a ruling. Their only concern should be a case’s legal merits. It isn’t for the courts to decide that following the law would prove too costly. They can’t just say, “oh, this is going to be bad for a lot of people, so let’s set the law aside”.
They’re going to have to rule solely on the merits of the case and decide what THE LAW says on the matter.
jybarz March 10th, 2015 at 08:49
I’m afraid if you’re right, it will be monumentally wrong for the people. I’d say GOP be afraid, really afraid now because millions would love to hate you if the decision is unfavorable.
illinoisboy1977 March 10th, 2015 at 10:50
It’s going to be up to the GOP lawmakers to have an adequate alternative ready to go, should the court undo the current system.