Virginians' Health Insurance Subsidies: In Danger?

Jun 22, 2015

The U.S. Supreme Court is expected to rule this week on whether people in nearly three-dozen states, including Virginia, who rely on the federal health insurance marketplace, can continue to receive subsidies from the federal government.  The case, known as King versus Burwell, is one of the most serious challenges to the Affordable Care Act.  WMRA’s Kara Lofton takes a look at what might happen in Virginia if the justices rule that the subsidies are illegal.

Currently, through the Affordable Care Act, the U.S. government provides subsidies for health insurance to low and middle-income Americans in all 50 states.

The subsidies average $272 a month and are awarded on a sliding, income-based scale. The subsidies were designed to make insurance premiums more affordable for consumers throughout the year.

Currently, these subsides are available to any state, regardless of whether the state chose to rely on the federal system rather than setting up their own state-based exchange. Virginia is one of the 34 states that uses the federal system.

The King v. Burwell case is contesting four words in the Affordable Care Act: “established by the state.” Because of these words, the plaintiffs say that people, such as Virginians, who live in states that rely on the federal exchange, are not entitled to subsidies from the federal government. Only states that have set up their own exchanges are entitled to the subsidies. Timothy Jost is a law professor at Washington & Lee University.

TIMOTHY JOST: If the Supreme Court decides for the plaintiffs, the premium tax credits that are issued by the federally facilitated marketplaces in two-thirds of the states, including Virginia, would stop probably within a month. And in Virginia what that would mean would be that about 286,000 Virginians would immediately lose the premium tax credits they have been receiving to purchase health insurance. They would then see effective increases in their premiums of about 287% and that would mean that health insurance would be unaffordable for almost all of them.

In order for health insurance to function well, it needs healthy customers to balance out the costs from the sickest people. But with the loss of the federal subsidies, Jost said what probably would happen is that only those with serious medical conditions would continue to try and pay such high premiums for care.  If the low-cost customers leave the market, premiums would increase dramatically for everyone who remains.

So if the Supreme Court rules in favor of the plaintiffs, what would Virginia do to protect its constituents? Republican Senator Emmett Hanger, of the Virginia Senate, weighs in on what he would like to do in the event of such a ruling.

EMMETT HANGER: What we could do in Virginia, very cost efficiently, because we are most of the way there, is to establish a state portal into the federal exchange.

By a state portal, he means an entity that functions as a kind of state-based exchange that facilitates entry into the federally-based system. He sees it as a bridge between the federal system and a full-fledged state exchange program. Such a “portal” would only be temporary, but would allow Virginians who currently rely on the subsidies to continue to have coverage while Virginia legislators develop their own exchange program.

In the end, it’s hard to know what Virginia would do, though, because as Hanger readily admits, it’s all about the politics.