The Republican takeover of the Senate may not spell the downfall of the Affordable Care Act, but the U.S. Supreme Court could still cripple it.
The High Court agreed on Nov. 7 to hear an appeal in a case challenging the legality of ACA health insurance subsidies in states that don’t run their own insurance exchanges.
King v. Burwell comes to the Supreme Court from the 4th Circuit Court of Appeals, which ruled in July that ACA tax credit subsidies are legal regardless of whether insurance is purchased through one of 16 state exchanges or the federal Healthcare.gov site that serves everyone else.
A Supreme Court decision for the plaintiffs—several Virginia residents who object to having to purchase health insurance—could crash the ACA’s complex fiscal math by undercutting the law’s individual mandate, which requires almost all Americans to have health insurance.
The mandate relies on tax credits to make insurance affordable for millions of consumers. Without subsidies, many newly insured individuals would probably drop their coverage, leaving the risk pool largely filled with people who have serious illnesses and chronic health conditions. That could trigger what the insurance industry calls a “death spiral”—lower revenues from premiums, plus higher claims costs, leading insurance companies to pull out of the ACA market.
About 87% of the 7.3 million people buying coverage through the ACA marketplaces qualify for subsidies.
The Court will hear arguments in King v. Burwell in early 2015, with a decision likely in June.
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