Pending Supreme Court decision on Obamacare could mean higher premiums for all

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WASHINGTON -- It's a 1,000 page law, but the case sitting before the U.S. Supreme Court focuses on merely four simple words of it: established by the state.

The case, King v Burwell, which focuses on the legality of tax subsidies provided under the Affordable Care Act, or Obamacare, will be decided before the end of the month but ruling could come as soon as this week.

Depending on the ruling, everyone in Michigan could see their health insurance premiums increase.

Under the Affordable Care Act, most Americans were required to buy into coverage in an effort to drive down healthcare costs for all. The idea was that an 'exchange' would be provided to allow people to shop around for coverage.

While 16 states created their own marketplaces to purchase health insurance, the remaining 34 states--including Michigan--did not, which automatically placed them into a federally-run marketplace known as Healthcare.gov.

Roughly 6.4 million people nationwide who use the federal exchange qualified for subsidies based on income to help cover the costs of premiums. In Michigan, more than 220,000 people are at risk of losing those federally funded subsidies. If the tax credits become unavailable, the average premium in Michigan could skyrocket for those individuals by as much 350 percent, according to estimates compiled by the Kaiser Family Foundation.

The question at hand--which will be answered by the U.S. Supreme Court--is whether it's illegall for the government to provide subsidies for people who bought plans through the federal exchange if the law states those subsidies are only meant for marketplaces 'established by the state.'

“That creates all kinds of market uncertainty with regards to what happens to individuals who can’t afford to continue paying the premiums without the subsidies," said Lisa DeMoss, professor with WMU Cooley Law School.

DeMoss said the most likely scenario would be that most healthy individuals would opt to take the penalty rather than buy into the insurance with the higher premiums. In the end, the least healthy people would still find a way to keep their coverage ultimately forcing the insurance agencies to 'significantly' increase premiums for everyone to make up the difference.

“It’s a huge disruption to the market for the delivery of healthcare services, it’s a huge disruption for consumers obviously who in a course of treatment of some sort and it’s a huge disruption for the insurance companies," DeMoss said.

“It’s anyone’s guess what will eventually occur, but hopefully for everyone’s sake there is an orderly transition from the current situation to some sort of a replacement plan.”

If the court's decision has immediate effect rendering the subsidies illegal, it's likely most currently receiving the subsidies through the federal exchange would not be able to continue to pay for coverage. However, the law still requires insurance companies maintain coverage for at least one month whether they've collected a premium or not, according to DeMoss.

Beginning August 1 through the end of September, DeMoss said health providers would be performing services for these individuals at their own financial risk before the coverage is retroactively canceled, which is what could drive up premiums for the following year.

“The challenge is going to be that if the Supreme Court invalidates this one feature in the statute, but everything else in the ACA stays in place," she said. "These are all interrelated, interconnected financing and delivery propositions that were very carefully constructed to work in tandem."

The U.S. Department of Health and Human Services has warned the Obama administration will be unable to cover the millions of Americans who could lose their medical insurance if the Supreme Court decides to unravel much of the Affordable Care Act.

Congress does have the option to step in during a situation like this to craft a bill to fix the issue, but given Republicans control both chambers that is an unlikely scenario, DeMoss said.

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