This story originally appeared on KUT News.
It’s a decision that comes down to four words.
Those four words appear in a section of the Affordable Care Act that deal with tax subsidies. Plaintiffs in the King v. Burwell case say those four words mean only people who bought an Obamacare plan on a marketplace established by a state government can get a tax subsidy to help them pay for it. A lot of people in Texas got a subsidy, but Texas chose not to set up its own insurance exchange. So people here, and at least 34 other states, bought their insurance on the federal exchange.
“In Texas through the middle of February 2015, over 1.2 million people have signed up on the individual health insurance marketplace — 85 percent of those received subsidies for their premiums,” Richardson says.
Sounds like tax subsidies in Texas are a big deal.
“The tax subsidies in Texas are a very big deal,” Richardson agrees.
Here’s how the subsidies work:
Consumers have two options. One, the federal government can send money to a health insurance provider to help offset monthly premiums. Or two, consumers can pay the full amount of the premium each month and then get a tax credit at the end of the year.
Kristin Johnson here in Austin got a subsidy, which helped her out after she was laid off last January.
“I have a son who has some very serious health problems and he’s a young adult but he’s completely dependent on me and so he has to have insurance,” Johnson says. “He absolutely has to have it no matter what.”
Johnson bought health insurance through the federal exchange. The subsidy means she can insure her son and herself for less than $250 a month. Without a subsidy, it would cost roughly $700 a month. Johnson would have to pay the full cost of her insurance if the Supreme Court strikes down the subsidies.
“It’s very possible that I would just insure my son and just get the absolute minimal insurance for myself, like a horrible plan,” Johnson says. “I have a few health needs, nothing as dire as his needs but, still, you don’t want to have to go on the worst plan because, well, you just don’t.”
Elizabeth Colvin doesn’t want people who’ve gotten subsidies in Texas to panic.
“The good news is there are many ways to fix this issue,” says Colvin, who directsInsure Central Texas, a program that helps people sign up for Obamacare plans.
“The Supreme Court in its ruling could allow some amount of time for this to go into effect,” she says.
Justices might give states time to come up with a state-run marketplace, or Congress could pass legislation to allow people with subsidies to keep them for a certain time period while they try to find insurance through other means, though that’s not an option that President Obama’s expected to sign on to.
If the Supreme Court does invalidate the subsidies, the decision could really impact the health insurance market overall.
“It could increase premiums by quite a bit because of what health economists call adverse selection,” says UT Professor Sam Richardson.
That means that without subsidies, many of the healthy people who bought an Obamacare plan will say “never mind, I can’t afford it and I don’t really need to go to the doctor.” Sicker people will keep their insurance, but insurance companies will want to offset the higher cost of insuring them.
“So that would drive up the premiums for everyone else,” Richardson says.
Last enrollment period under the Affordable Care Act, Central Texas had 115 plans from which to choose from nine different insurance companies. Colvin hopes that even without subsidies, competition among insurers would help keep costs manageable.