If the Supreme Court strikes down federal subsidies for Obamacare in the much-anticipated case of King v. Burwell, millions of Americans will lose their health coverage, insurance premiums will skyrocket, and hospitals would be forced to absorb higher costs for a surge in uncompensated care.
That’s according to a gloomy new study from the Urban Institute, which analyzed what could happen if the Court rules against the Obama administration and deems millions of Obamacare enrollees ineligible for federal subsidies.
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The study claims such a ruling would have far-reaching economic implications on the entire health care system, not just for the millions of people getting coverage through Obamacare’s exchanges.
Researchers estimate that in this scenario about 8.2 million people would lose their health insurance. This includes 6 million who would no longer have access to federal subsidies, 445,000 enrollees in the Children's Health Insurance Program and another 300,000 in employer-based plans. Since so many people would be leaving the risk pools, the price of premiums would surge, forcing an additional 1.2 million Obamacare enrollees who didn’t qualify for subsidies to drop their health plans.
The sudden increase in uninsured people would unsurprisingly have an enormous impact on health care spending and hospital revenues.
For instance, these 8.2 million people are poised to spend an estimated $27.1 billion on health care next year. However, if they lose their coverage, that would drop to $5.3 billion and hospitals would absorb $12 million in uncompensated care.
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The majority of uncompensated care comes from emergency room visits from uninsured people.
This could be a big deal for hospitals, since government funding to cover these costs has been scaled back under Obamacare. Of course, the whole reason the funding was cut was because the health law is supposed to significantly curb uncompensated care.
The Obama administration estimated last fall that the health care law would save hospitals $5.7 billion in uncompensated care for 2014.
However, the federal subsidies at stake in the case would play a major part in that cost-savings, by making health care more affordable for more people to purchase coverage.
Still, it’s unclear how the Court will rule when it makes its decision in June. And even if it rules against the administration and strikes down the subsidies, there are other ways the subsidies could be restored—including through Congressional action, which isn’t likely.
States relying on the federal exchange could pass legislation to create their own exchanges in order to make their residents eligible for subsidies. For now, health and legal experts will have to wait and see what the Court does.
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