Loss Of HealthCare.gov Subsidies Could Have Devastating Effect On N.J., Study Says

NJBIZ — Monday, March 2, 2015

By Beth Fitzgerald

New Jersey would lose $780 million a year in federal health insurance subsidies, thousands would drop their health coverage because they couldn't afford it, and a shrinking pool of customers would drive up health insurance premiums.

That would be some of the impact on the Garden State if the U.S. Supreme Court outlaws federal subsidies for states using the federal HealthCare.gov website to award subsidy dollars under the Affordable Care Act, according to a study by New Jersey Policy Perspective released Monday.

Ray Castro, senior policy analyst for NJPP, said his findings are based on data from the federal government and on a Rand Corp. study of the nationwide impact of a potential Supreme Court ruling against HealthCare.gov subsidies.

The court hears arguments Wednesday in King v. Burwell, the lawsuit that contends the ACA only authorized federal subsidy payments in health insurance marketplaces created by the states — but not in the federal marketplace, HealthCare.gov, which is used by millions of people in New Jersey and 33 other states.

The court is expected to decide the case by the end of June.

Opposition to the ACA is led by Congressional Republicans, who have voted numerous times to repeal the law, which passed in 2010 without a single Republican vote.

The NJPP study, for the first time, uses ZIP code data to break down by Congressional district the number of Jerseyans getting ACA subsidies — and who would lose them if the court rules against the HealthCare.gov subsidies.

The data show that "New Jerseyans in solidly Republican and solidly Democratic Congressional districts would be affected equally, suggesting that this should be a nonpartisan issue," Castro said. His analysis found that, as of Jan. 15, there were 88,313 New Jerseyans receiving subsidies in Congressional districts represented by Republicans, while 87,924 get subsidies in districts represented by Democrats.

When HealthCare.gov launched nationwide in 2014, about 162,000 New Jerseyans used the federal website to buy health insurance.

But enrollment rose dramatically in the second year of Obamacare: About 253,000 New Jerseyans have so far used HealthCare.gov to enroll in a 2015 health plan.

Castro said federal data show that about 84 percent of them, or 210,000, qualified for tax credits averaging $3,708, which would translate into an aggregate loss of $780 million in federal funds to New Jersey if those subsidies are struck down.

Castro said the loss of federal subsidies would dramatically shrink the state's individual health insurance market, which includes those who use HealthCare.gov to buy coverage as well as those who buy health plans directly from insurers. He predicted that premiums would rise overall in the individual market, since only the sickest people keep their insurance and there are fewer healthy people to spread the risk.

Castro estimated premiums would rise overall in the individual market by 47 percent, pushing up the average premium to $8,489, from $5,772, and that about 246,000 New Jerseyans would drop health coverage they could no longer afford.

Castro's estimates are in line with those of other health policy experts.

Joel Cantor, director of the Rutgers Center for State Health Policy, cited Urban Institute estimates that New Jersey would lose $727 million a year, 237,000 Jerseyans would lose their subsidies and 239,000 New Jerseyans would drop coverage if the Supreme Court outlaws the HealthCare.gov subsidies.

"It is not an understatement to say that a ruling in favor of the plaintiffs in the King case would render the New Jersey direct-purchase health insurance market nonfunctional," Cantor told NJBIZ. "Over 200,000 would drop coverage due to loss of subsidies and rising premiums. Those remaining in the market would see initial premium increases of perhaps 40 percent to 50 percent, leading to further exit of younger and healthier insureds and ultimately a marketwide death spiral."

Cantor said that, without the subsidies, "any remaining coverage available on the individual market would be extremely expensive, with very high cost-sharing and very limited provider networks. Some or even most insurers would withdraw from the market, reversing the progress we've seen in increased competition. We may even see one or more insurers go out of business altogether."

The impact on small employer group plans is harder to predict, but some of those who drop their individual policies will look at purchasing a group health insurance plan, Cantor said.

While Gov. Chris Christie is on record in opposition to the ACA, he agreed to the ACA-funded Medicaid expansion that has added about 390,000 to NJFamilyCare, the state Medicaid program.

State-run exchanges can continue to award subsidy dollars, regardless of the Supreme Court ruling. In 2012, New Jersey's Democrat-controlled Legislature twice passed bills to create a state-run insurance exchange that were vetoed by Christie.

Castro said New Jersey should again try to create a state exchange in the event the court rules to abolish subsidies in the HealthCare.gov marketplace.

Castro said state officials "ideally should start planning for a possible state exchange. They may have to be up and running very quickly: They can't just wait until a (Supreme Court) decision is made."

And, Castro said, "If the governor is not going to go for a (state) exchange, he has to have some kind of a medical emergency plan" for New Jerseyans who will drop their health coverage if they lose the subsidy.

The state's health care industry should also begin contingency planning in the event the Supreme Court rules against HealthCare.gov subsidies, Castro said.

"If people become uninsured, they will go to community health centers and to hospitals" for medical care, Castro said.

"A lot of people are going to be in the middle of treatment" when the Supreme Court issues its ruling in June, Castro said. "If you have a heart operation scheduled, does that mean you don't get the operation? The health care industry needs to be thinking about what this means to them and how they can try to deal with it."

Sarah Lechner, general counsel of the New Jersey Hospital Association, said, "NJHA is watching the case closely, as the impact of a negative ruling would be devastating to New Jersey hospitals."

Lechner said the availability of subsidies was one of the key tenets of the ACA, and more than 80 percent of New Jersey residents who have signed up for commercial insurance through the federally facilitated marketplace have been deemed eligible for these subsidies.

"The loss of those subsidies could jeopardize insurance coverage for thousands of individuals, which in turn would put a greater burden on hospitals to care for the uninsured," Lechner said. "Hospitals will continue to provide the care, but the ongoing fiscal hit to hospitals would be significant."

John Sarno, president of the Employer Association of New Jersey stated, "All employers are stakeholders in the success of the Affordable Care Act. Both employers and employees want and need good health coverage at affordable prices. More than half of New Jersey's small employers do not provide health coverage. Giving uninsured workers the opportunity to get covered and receive financial assistance to purchase a plan for themselves and their families benefits us all."

Daniel Santo Pietro of the Latino Action Network stated, "A ruling for King would have a devastating impact on the Latino community. Latinos are disproportionately uninsured and it has been difficult to get them enrolled. A loss of subsidies that made their coverage affordable would be a major setback that will push our low income population even further back and increase the disparity they suffer in our state."

NJPP released its study of the impact of the Supreme Court case at a Monday news conference at the Statehouse in Trenton organized by the NJ For Health Care Coalition.

Organizations that participated in the news conference included New Jersey Citizen Action, the Anti-Poverty Network of NJ, the Statewide Parent Advocacy Network, the National Association of Social Workers-NJ, the National Council of Alcoholism and Drug Dependence-NJ and the Mercer Hispanic Association.

"The Affordable Care Act is working by making a difference in the lives of hundreds of thousands of people all across our country," Maura Collinsgru, health care program director for New Jersey Citizen Action, said in a statement from the coalition following the news conference. "This is not a case of King v. Burwell. This is a case of King versus the more than 200,000 New Jerseyans and others like them all across America who have health coverage because of tax credits."

"The legal basis of the argument in this case is weak," added Renee Steinhagen, attorney for New Jersey Appleseed. "When Congress wrote and passed the ACA, everybody — Republicans, Democrats and the Congressional Budget Office alike — agreed that the tax credits would be available in all states."

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