If a Halbig victory is announced tomorrow, nothing will change – for now, at least. The president will likely either ignore the decision, which he asserts is perfectly legal, or appeal it.
If the president chooses to ignore the ruling, we can bet a messy legal battle – and maybe even an impeachment attempt– will ensue. In the case that Obama appeals the decision, the case will go to en banc review (all the judges of the D.C. circuit hear the case, instead of just a panel of three). If the en banc ruling is in Halbig’s favor, then that decision will likely be appealed to the Supreme Court.
The appeals process could take years, so there’s a long way to go. But if Halbig wins, what will healthcare in America look like? It’s a complicated question with a lot of potential answers, but here’s my best guess:
For some Americans, not much will change. In the 17 states with state-based exchanges, the federal subsidies will continue, and health insurance will be business as usual. This could also be the case in the seven states with state-federal partnerships because it’s unclear how the ruling would affect these hybrid exchanges.
Will exchanges disappear in the 27 states with federally facilitated exchanges? Probably not. It’s more likely that there will be an increase in state-based exchanges, according to Don Taylor, a health policy expert from Duke University. Taylor estimates that 20 states would pass laws saying their state will use the federal mechanism for a state exchange, similar to subcontracting with the federal government.
He said that because so much uncertainty has surrounded the implementation of the law, many states took a “wait and see” approach to creating independent exchanges. However, given the choice between losing federal premium subsidies and setting up their own exchanges, a good number of them will do the latter.
Even states who opted out of the Medicaid expansion may opt in to exchanges. One of conservative states’ main issues with the Medicaid expansion was the declining federal match. Unlike the Medicaid expansion subsidy, the exchange premium subsidies are fully funded by the federal government perpetually, so there is no fiscal reason for states to be opposed. But ideological reasons will be enough to keep exchanges out of some states, especially deep red ones like Texas.
So what will healthcare look like in Texas, and in other states where federal subsidies are likely to stop flowing? It’s hard to say exactly what the impact will be, but it’s fairly certain that the individual insurance market will contract, and possibly even disappear completely.
Insurers will have to decide if it’s a good investment to continue offering policies in the individual market. It’s not entirely clear whether or not there will be customers who are interested in (and can afford to) purchase insurance in the individual market, but it seems unlikely. Only 13 percent of exchange customers bought their policy without help from a subsidy in 2014, so a lot of people will be priced out of the market as soon as subsidies disappear.
As the market contracts, the risk will increase and prices will increase with it, making purchasing insurance less attractive to young, healthy people. Conversely, unhealthy people and people with preexisting conditions are likely to pay more for coverage because their health expenses are so high.
Then, there will be too many sick people and too few healthy people in the risk pool; prices will rise until either overage is unaffordable or insurers simply stop offering it because they aren’t likely to profit. At the same time, the individual mandate will apply to a shrinking number of people because those whose health costs exceed 8 percent of their annual income are exempt.
Even in the states without exchanges, people with employer coverage, Medicare, or Medicaid aren’t likely to be affected. But a large number of people, at least the ones who are currently getting subsidies, are likely to become uninsured – again.
States may have to craft solutions to deal with the newly uninsured. We don’t know what Congress will look when (and if) a ruling comes down in Halbig’s favor, but timing could be important. Even if the November midterm elections bring a Republican majority in both houses, Obama would almost certainly veto any bill that majorly alters the law. If the process takes more than two years, it’s hard to say how a President Christie or Clinton and the future Congress would handle the matter.