Latest Obamacare Challenge - King v. Burwell

The Supreme Court will hear a case Wednesday, March 4th 2015 called King v. Burwell in which the plaintiff argues the federal subsidies provided to some Affordable Care Act (ACA) enrollees are not legal and should be discontinued. The challenge arises from a technicality in the law which says subsidies will be provided to those enrollees obtaining insurance coverage from state exchanges, not federal exchanges. Enrollees from states without a local exchange relied on the federal exchange to purchase plans. A victory in the case would mean 6 million people will no longer receive health insurance premium subsidies.

Journalist Margot Sanger-Katz explains in yesterday's New York Times how this ruling against the ACA could drive up health care costs for everyone. In her article How an Adverse Supreme Court Ruling Would Send Obamacare Into a Tailspin she says if subsidies are removed only those who cannot afford not to have coverage will stay in their plans. They will be the oldest and sickest of the pool of previously uninsured. Meanwhile, those who went without coverage previously because they were healthy will forego the plans made pricier by the removal of subsidies.(1)

An Op-Ed from an assistant professor Nicholas Bagley at the University of Michigan published in the Times the same day argues the plaintiff's narrow reading is absurd, that no small line of a statue may be read in isolation, and demonstrates how the individual mandate phrase was not viewed this way.(2)

There is no question this case is problematic. If the judges rule against the ACA millions could lose subsidies. Those who cannot afford the full retail price of a health insurance plan may decide to opt out of a plan all together. But notice how the ACA is discussed in pieces like the ones above by Sanger-Katz and Bagley. They ignore where the subsidies are coming from in the first place.

I know we cannot discuss the merits of the core of every issue whenever some aspect of it is brought up, but since the ACA is so new I think it's worth mentioning again.

Let's call the ACA what it really was - a health insurance reform bill. It did not focus on reducing the cost of care but on getting everyone into an existing, expensive system through a combination of mandates and subsidies. Where do the subsidies come from?  You and I will pay taxes which will be forwarded to US health insurance companies who are charging a lot of money for health insurance plans.

I wanted to see how much a subsidy is worth so I went to a random exchange to see how much I would get in subsidies if I had to buy a plan on the market. In Maryland's exchange I typed in my age and put a low figure - $20,000 for income. As a result I would get $134.31 in subsidies each month.

I could get a Silver plan with an $1100 deductible for $165.00 after the subsidy. This works out very well for everyone except the taxpayer who must pay a portion of their income to pay the premiums of someone else's insurance plan. (I understand the cost to the taxpayer for someone who does not have care using the emergency room. This maybe be a more efficient means of taxing to provide a benefit to others, but it is a tax nonetheless.)

I would like to know if the true cost of the plan in Maryland is $134.00 + $165.00 or if there are some behind the scenes funds the federal government is paying to these insurance carriers. It doesn't matter because even $165/month for a plan is 10% of a $20,000 gross income.

Today I received a notice of creditable coverage in the mail from my health insurance company. My plan is employer-sponsored so I don't see the full price anywhere except this mailing.

The monthly premium for my health insurance plan for 2015, combining my portion and my employer's portion is $562.45 per month. On my pay stub I see that I only pay $142 per month and my employer pays $420.45. Let's say my wage was the Massachusetts equals the 2014 median household income of $66,768. That means my health insurance premiums (total shared $562.45) are 10% of my gross income. Of course, I don't pay for my entire premium and the premium I do pay is pre-tax income. Still, 10% is a lot of money to go toward an insurance policy. If I had to pay for my entire premium it would be my second largest expense after housing!

So a Silver Plan in Maryland with a reasonable deductible costs $300 per month, pre-subsidy for someone making $20,000 - that would be 18% of that person's income . My plan in Massachusetts is $562.45 per month for a plan with a reasonable deductible. Based on median Massachusetts income of $66,768, the premium equals 10% of annual income.

The point is not whether the premium is paid by an employer or subsidized on an exchange, the point is why did the ACA just try getting people into an expensive system? Why should health insurance cost double-digit percentages of our incomes?

I wish more commentary would address this failing of the ACA when cases like King v. Burwell occur. Instead, all we read about is what people would lose if the act was changed. By discussing the impact of losing a subsidy without discussing where the subsidy comes from or why it is necessary we miss the chance to address the real problem of cost.

(1) http://www.nytimes.com/2015/03/02/upshot/how-an-adverse-supreme-court-ruling-would-send-obamacare-into-a-tailspin.html

(2) http://www.nytimes.com/2015/03/02/opinion/in-king-v-burwell-the-plaintiffs-misread-obamacare.html?ref=opinion