Roosevelt Institute | Cornell University

Preparing for the Worst: King v. Burwell and its Dangerous Implications

By Maddie CrippsPublished March 11, 2015

The most recent challenge to the Affordable Care Act (ACA) - the King v. Burwell Supreme Court case - calls the legality of more than 6 million subsidized health insurance premiums into question. Now, with millions of Americans' health insurance at stake, government officials must overcome political biases and work to prevent the adverse effects the case may have.
By Maddie Cripps, 3/11/2015

In recent decades, American politics have been defined by extreme partisan polarization and congressional gridlock, and no example better illustrates this divide than the Affordable Care Act (ACA). The ACA turned the politically neutral idea of providing highly affordable health care to all Americans into a passionate debate, governed by strict party beliefs. Republican officials have repeatedly challenged the ACA and its legality since its enactment in 2010, with the hopes of preventing the law's continuation. The most recent of such oppositions is the King v. Burwell case, which will be argued before the Supreme Court early this March. The case stems from a mere seven words buried within the complex law, which state that federal subsidies and tax credits should be given to those who purchase insurance on state-run — as opposed to federal — exchanges. Considering the fact that 37 (mostly) Republican governors protested the law by refusing to establish statewide insurance exchanges, the argument presented in the case threatens these states' health care systems, and has the potential to undermine the ACA's design and reverse its effects. With the Supreme Court decision expected in June, Republican officials must now consider all possible outcomes and determine whether maintaining irrational, political bias is truly more important than assuring constituents' overall health and wellbeing.

Despite its controversy, the ACA has resulted in many, significant improvements following its implementation in 2013. In just one year, the act made health care both more accessible and affordable, effectively decreasing America's uninsured population. In fact, an estimated 10 million, previously uninsured Americans had gained access to affordable health care through the ACA by 2014. The most substantial improvements have taken place, ironically, within poor, Republican-run states, such as Texas, Arkansas, and West Virginia. Further, strictly Republican counties have seen larger reductions in the number of uninsured residents than have strictly Democratic counties, with 5% and 3% decreases, respectively. Considering these facts, the ACA has been largely successful, thus far.

This success, however, is almost entirely dependent on maintaining a balance within the health insurance market. Under the ACA, insurers are prohibited from denying coverage from or raising premiums for sick individuals. To offset the costs imposed by the sick and keep premiums low, it is imperative that the insurance pool includes young, healthy people. With this goal in mind, the ACA includes two incentives designed to keep healthy people in the market — individual mandates and subsidies. The individual mandate encourages insurance enrollment by requiring that those choosing to remain uninsured pay a fine. Motivating individuals by means of a slightly different approach, the government also incentivizes health coverage by subsidizing premiums for low- and middle-income Americans, making enrollment more affordable. Failure to maintain the delicate balance outlined by the ACA would result in what health policy experts refer to as the "death spiral" — the cycle that results from healthy people exiting increasingly expensive insurance markets, leading to smaller, sicker insurance pools — a phenomenon that ultimately impedes the law's overall success.

King v. Burwell questions the legitimacy of the more than 6 million federal subsidies granted to residents of the 37 states that lack their own exchanges. Of the insured residents in these 37 states, 87% rely on subsidies to be able to afford insurance. Should the Supreme Court decide to block these subsidies, many insured individuals in the affected states would be forced to drop coverage, resulting in a smaller and sicker insurance pool. This would force health providers to shift their focus from less expensive preventative services, to extremely costly critical care. Researchers estimate that blocking subsidies may result in a potential 47% spike in premium costs and an increase of 8 million uninsured Americans in the affected states — essentially reverting back to pre-ACA conditions. At the same time, however, the 13 states without blocked subsidies would remain unaffected. Thus, further undermining the ACA, King v. Burwell has the capacity to create two separate insurance markets, in which large disparities in health coverage access and affordability exist from state to state.

Republican officials' refusal to establish state-run insurance exchanges began as a selfish political statement, but these stubborn, myopic actions may soon result directly in not only inconsistent insurance markets, but also an increase in millions of uninsured Americans. Politics aside, the benefits the ACA and its subsidies have had on people — predominantly in Republican-run states — are evident. With greater access to more affordable health coverage, Americans are happier and healthier than they were prior to ACA enactment. With King v. Burwell threatening to reverse many of the ACA's successes, some Republican leaders have become concerned with their liability on the issue. It is imperative, however, that these Republican officials develop comprehensive contingency plans, which — in the event of subsidy blockage — would prevent affected individuals from losing coverage. Failure to address subsidy loss and its consequences in affected states would be extraordinarily irresponsible, as it is crucial — from both an individual and public health standpoint — that the ACA's positive results remain undamaged.