NJ Spotlight

Prognosis Bleak For Many In NJ If Supreme Court Rejects Health Insurance Tax Credits

Losing subsidies under Affordable Care Act could prove disastrous for residents with health problems who might lose insurance

NJ Spotlight — Wednesday, March 4, 2015

By Andrew Kitchenman

Yolanda Quintero knows what it's like to go without health insurance. She doesn't want to go through that again.

But that may depend on how the U.S. Supreme Court rules in a case involving the legality of tax subsidies that are key part of the federal Affordable Care Act.

Quintero and her family lost their coverage in 2010 when Gov. Chris Christie ended NJ FamilyCare coverage for legal immigrants who had been in the country for less than five years.

After losing her insurance, she then needed brain surgery for an aneurysm, leaving her with large medical bills.

She later was able to buy health insurance through the federal marketplace.

"We are all covered and we receive the best coverage for my family," Quintero said.

Now Quintero is again facing the possibility of losing her insurance, as the nation's highest court rules in the King v. Burwell case King v. Burwell case on whether tax credits that subsidize individual and family health insurance under the ACA are invalid. The court will hear oral arguments in the case today and is expected to issue a decision in late June.

King v. Burwell focuses on a provision of the ACA that specifies that the tax credits are available for those who buy insurance through exchanges established by the states.

The plaintiffs argue that there can't be subsidies for those who live in states like New Jersey that opted for a federally operated marketplace because the law doesn't specifically say that residents of these states can receive subsidies.

Federal officials argue that in reading the entire law, it's clear that residents in every state are eligible for subsidies, whether or not their state created its own insurance exchange.

Analysts expect that many people will drop their coverage if they lose their subsidies.

A new report finds that many of the people most likely to be affected by losing the subsidies live in areas represented by congressmen who are critical of the ACA.

The impact of the top court's decision could extend beyond the ACA to individual insurance plans purchased outside of the marketplace, as well as to the state budget, since Gov. Chris Christie has proposed cutting hospital charity care spending by $148 million due to a drop in the number of uninsured residents in New Jersey because of provisions of the ACA.

While ACA supporter U.S. Rep. Bill Pascrell (D-9th) represents the congressional district with the most New Jersey residents receiving subsidies, ACA critic U.S. Rep. Chris Smith (R-4th) represents the district with the second-highest number of residents with ACA insurance subsidies.

The district with the fewest residents receiving ACA subsidies is actually one of the districts with the highest poverty levels: the 10th Congressional District represented by Democratic U.S. Rep. Donald Payne Jr.

That number is low because the newly expanded NJ FamilyCare, the state's Medicaid insurance program, covers a larger share people who live in the district.

U.S. citizens and immigrants who have been in the country legally for longer than five years can receive FamilyCare coverage if their income is less than 138 percent of the federal poverty level, currently $16,243 for a single person and $33,465 for a family of four.

The ACA subsidies cover citizens and all immigrants with legal status with incomes between 100 and 400 percent of the poverty line, which currently amounts to $24,250 and $97,000 for a family of four.

"These are working-class individuals," said Raymond J. Castro, senior policy analyst for New Jersey Policy Perspective. "They are throughout the state and they really go beyond the usual political boundaries."

A total of 252,792 state residents have enrolled for insurance through the ACA marketplace, with 84 percent of them receiving subsidies.

New Jersey Citizen Action healthcare program director Maura Collinsgru said New Jersey should take action to establish a state-based exchange, through which residents would be eligible for subsidies, ahead of the court decision. She's been working with a coalition of different nonprofit organizations, known as New Jersey for Health Care, which supports expanding access to healthcare.

"We in the coalition see this case not as King v. Burwell, but King v. 200,000 New Jerseyans who would have a devastating impact and again be at risk of losing their coverage and access to the healthcare treatment they need," Collinsgru said.

Castro said the state could launch an exchange more quickly if it began preparations now, rather than waiting until June for the court to rule. He noted that the state did research on having a state exchange before Christie decided against it.

Christie spokesman Kevin Roberts said the governor's office didn't have a comment "at this time" on Castro's comments or the King v. Burwell court case.

Castro compiled the report, which calculated that state residents would lose an average of $3,708 in annual subsidies if the court ruled the tax credits invalid, for a total of $780 million statewide.

He noted a RAND Corp. study that estimated average premiums would rise by 47 percent.

But that would just be the increase for 2015. The impact would likely get even worse after that.

The reason is that healthier people would be more likely to drop their coverage, while more people with existing health problems would be expected to try to pay the higher premiums in order to keep their coverage.

With fewer healthy people enrolled, insurers would likely steadily increase their premiums, a process that has been described by analysts as a "death spiral" for the individual health insurance market.

This would also affect the roughly 100,000residents who bought insurance directly from insurers outside the marketplace, since the plans and premiums inside and outside the marketplace are identical.

RAND analysts estimate that 70 percent of all people with individual and family insurance would drop their coverage, which Castro said would amount to roughly 246,000 people in New Jersey.

Castro added that a ruling invalidating the subsidies would also hurt the state budget, since hospitals would see an increased need for subsidized charity care.

A Robert Wood Johnson Foundation report estimates that the amount of healthcare spending that would go uncompensated as a result of a rise in uninsured residents due to the loss of subsidies would total $335.2 million in New Jersey.

The Rev. David Stoner, pastor of Temple Lutheran Church in Pennsauken and a member of the New Jersey Anti-Poverty Network of New Jersey, said he is s concerned that chipping away at the ACA will increase poverty.

Invalidating the subsidies would put "another nail in the coffin of people who are trying to get themselves moving forward and moving up into a place of security, without health care and you get sick, you are insecure," Stoner said.

John Sarno, president of the Employers Association of New Jersey, said the tax credits have benefited businesses in the state, by keeping more workers healthy and on the job, adding that businesses would have to absorb the costs of lost productivity if access to healthcare declined.

"The more workers we get insured, the more people we get insured in New Jersey, the better it is for the wider economy," said Sarno, whose association advises business executives on employment law and offers a health insurance plan to small to mid-sized businesses.

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