Pennsylvania and Delaware Pave a Pathway for Preserving Health Insurance Subsidies

Tuesday, June 23, 2015 at 6:42 PM by

A Supreme Court decision expected within the next week could price health insurance out of reach for millions of Americans, including most of the 183,000 Wisconsinites insured through the federal Marketplace; however, state officials could head off that outcome.  In Wisconsin it’s particularly important for state lawmakers to remedy the problem because they made our state more reliant on federal subsidies for the Marketplace when they ended BadgerCare eligibility for about 60,000 adults and 3,000 children. 

If the U.S. Supreme Court rules in the King v. Burwell case that subsidies only apply in states with their own health insurance exchange, state officials will need to move quickly to protect insurance for the 183,000 Wisconsinites who have purchased Marketplace plans. Quick action will also be needed if the state hopes to avoid serious financial harm to insurers that offer individual plans (inside or outside the Marketplace) and to prevent the harm to hospitals whose uncompensated care would rise sharply if tens of thousands of state residents become uninsured. 

Establishing a Marketplace from scratch would be a daunting task, but that isn’t necessary.  Wisconsin could follow the path taken in Pennsylvania and Delaware. Those two states got conditional federal approval last week to operate state-based Marketplaces that piggyback on HealthCare.gov – using that federal infrastructure (if necessary) as the platform for taking and processing applications for coverage. 

State legislators could also expedite the process of authorizing the creation of a state Marketplace by approving or amending a bill like the one introduced in April by Senator Vinehout and Rep. Sargent.  If the majority party prefers to substitute a different version for the one offered by the Democrats, that’s fine – but the Vinehout/Sargent bill provides a convenient vehicle for getting the legislative process in motion. 

A short report that WCCF issued last week analyzes the consequences for Wisconsin of a decision ending the subsidies in our state and shows how we have more at stake than most other states. The cost of failing to take corrective action would be very high, including a loss of about $50 million per month for the premium tax credits alone.

As that report notes, the Urban Institute estimated early this year that 247,000 fewer Wisconsinites would be insured in 2016 if the Court strikes down the subsidies and state officials fail to take corrective action. That estimate reflects the fact that a ruling adversely affecting the federal Marketplace is expected to cause about a 35% jump in costs for individual plans purchased outside the Marketplace, because the new people who decide to purchase unsubsidized coverage will be significantly less healthy than those now purchasing individual plans. 

But the good news is that our state and others can head off the very chaotic and costly consequences of a decision ending Marketplace subsidies.  State lawmakers should either move on the Vinehout bill or rapidly introduce a bill of their own, and they should follow the lead of Pennsylvania and Delaware by using the federal Marketplace’s infrastructure as the platform for quickly putting into place an insurance exchange that will protect Wisconsin consumers, providers and insurers.

Jon Peacock

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