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More Uninsured, Higher Premiums if Subsidies End in Federal Marketplace

Millions more Americans would be uninsured and premiums in the individual (nongroup) market would jump if the Supreme Court disallowed health reform subsidies for people getting coverage through the federal marketplace, new studies from the Urban Institute and RAND Corporation show. These studies show why it’s critical for the Supreme Court to recognize that health reform provides subsidies in all states. As we’ve explained, plaintiffs in a case before the Court claim that under the Affordable Care Act (ACA), premium credits to help eligible people afford marketplace coverage are supposed to be available only in states that set up their own marketplaces. Invalidating the subsidies for people in states that didn’t create their own marketplaces would result in 8.2 million more people uninsured and 35 percent higher premiums for those who get coverage through the individual market, the Urban study finds.  Similarly, RAND finds that 8.0 million more would be uninsured and premiums would rise by 47 percent. The number of uninsured would jump because many people would find coverage unaffordable without subsides.  Premiums would jump because younger and healthier people would be especially likely to do without coverage, leaving those who continued to buy coverage older and less healthy, on average — and thus costlier to cover. Both studies show that premiums would rise for everyone in the individual market, including those who buy coverage outside the federal marketplace.  That’s because health reform requires insurers to base their premiums on a single risk pool for all coverage they offer, both inside and outside the marketplace. These price increases would have a significant impact, even on people with incomes too high to qualify for subsidies.  The number of people with incomes above 400 percent of the poverty line — the maximum level to qualify for a subsidy — buying coverage through the federal marketplace would fall by 42 percent, Urban estimates. Of course, the impact on lower-income people would be even greater, since they would face higher premiums plus the loss of subsidies (and have more limited budgets to start with).  Fully 91 percent of people with incomes below 200 percent of the poverty line would leave the federal marketplace, according to Urban.