Supreme Court Case on Health Care Subsidies Will be Especially Important for Wisconsin

Wednesday, March 4, 2015 at 5:34 PM by

BadgerCare Cuts Have Made Wisconsin More Reliant on the Federal Marketplace

The latest Supreme Court case relating to the federal health care reform law is particularly important for Wisconsin.  Our state has a lot at stake because of the decision to rely on the Affordable Care Act (ACA) to make subsidized private health insurance available to tens of thousands of people formerly eligible for BadgerCare.  In addition, as the Star Tribune reported, Marketplace premiums are higher in Wisconsin than in most other states, which makes subsidies more important here.  

Oral arguments in the case, King vs. Burwell, were heard today.  The case calls into question whether low and moderate income people using the Federal Exchange (Marketplace) to purchase health insurance are allowed to receive the subsidies that currently help them pay for that insurance coverage. 

The plaintiffs argue that there is language in the ACA that seems to say subsidies are available only to people living where Marketplaces are “established by the state.”  If their argument is accepted by the Court, eligibility for the subsidies would end in Wisconsin and up to 36 other states (unless they move quickly to establish their own insurance Marketplaces).   

The following figures help illustrate why Wisconsin has a tremendous amount riding on the continuation of the federal subsidies for Marketplace insurance plans:   [Note that these figures were updated in mid-March.] 

  • 207,349 Wisconsinites signed up for or re-enrolled in a plan through the federal Marketplace (Healthcare.gov) by the end of this year’s open enrollment period in mid-February.
  • 184,822 (89%) of those who signed up or re-enrolled qualify for subsidies, and their average tax credit is $315 per month.
  • 63,000 individuals, mostly parents, lost BadgerCare coverage following the policy changes Wisconsin made in April 2014; and state lawmakers were banking on those individuals being able to purchase affordable coverage through the Exchange with the assistance of the federal subsidies. (As of last summer, about 26,000 of the former BadgerCare participants had purchased Marketplace plans.)

A decision striking down the subsidies would be a harsh blow for more than 9 million individuals in the states that don’t run their own exchanges.  Those participants generally wouldn’t be able to afford Marketplace plans without the subsidies, and a huge drop in the number of people with Marketplace coverage would drive up costs for the rest.   With those sorts of factors in mind, an analysis by the Urban Institute concluded that:

“…a victory for the plaintiff would increase the number of uninsured by 8.2 million people and eliminate $28.8 billion in tax credits and cost-sharing reductions in 2016 ($340 billion over 10 years) for 9.3 million people.” 

In 2013, when Governor Walker proposed cutting in half the eligibility ceiling for parents in BadgerCare, he argued that Wisconsin would nonetheless be able to reduce by nearly 50% the number of uninsured adults in our state – thanks in large part to the ACA’s subsidized Marketplace coverage for adults over the poverty level.  A ruling striking down the subsidies in states like Wisconsin could put that goal far out of reach, and would significantly increase the uncompensated care costs that get shifted onto people who have insurance.   

Thus far, the Walker Administration has indicated that regardless of the outcome of the case, they have no intention of establishing a state-run Insurance Exchange that would qualify our state for the federal subsidies. 

With luck, the Supreme Court will rule against the plaintiffs, and we won’t need to find out whether the Governor continues to oppose establishing a state-run Exchange.  But if the Court does strike down the subsidies in the states using the federal Marketplace, and if the Governor resists establishing a Wisconsin-run Marketplace, pressure will grow on state lawmakers to reconsider their decision to dramatically reduce BadgerCare eligibility for parents.

Sashi Gregory and Jon Peacock

2 Responses to “Supreme Court Case on Health Care Subsidies Will be Especially Important for Wisconsin”

  1. Severa Austin says:

    Hi John…When will Supreme Court report their decision on this…July 3 used to be when they published controversial decisions and then they
    went home!
    Thank you for all of your great work and information.

  2. Jon Peacock says:

    Hi Severa, There’s never a firm timetable, but you’re right that they typically issue the major decisions shortly before they begin a long recess around the beginning of July. The articles I’ve read about this case have generally said the decision is expected “in June.” Given the imprecision of that statement, it seems like a pretty good bet. Although I wouldn’t rule out July 3rd as a possibility, this case seems less complicated than many others, and I would hope that it wouldn’t be pushed off that far.