Republican Plan For Obamacare Subsidies Won't Prevent 'Massive Disruption,' Report Concludes

Millions of Americans could lose their insurance coverage or face higher premiums under the GOP plan to extend the Affordable Care Act's subsidies.

U.S. Senator Ron Johnson

U.S. Senator Ron Johnson, a first-term Republican from Wisconsin, sued President Barack Obama’s administration this year. He argued the subsidy treats legislators and their employees better than most Americans working for private employers, violating the U.S. Constitution’s guarantee of equal protection.

Drew Angerer/Bloomberg

A new analysis of a Republican proposal to temporarily continue Obamacare premium subsidies if the Supreme Court erases them warns that it would "only delay" the onset of higher insurance premiums and loss of coverage for potentially millions of Americans.

"Even if a temporary extension of premium subsidies would help avoid disruption in the short term, it is likely that the disruption would be only delayed, not avoided altogether. If the subsidies are ultimately eliminated, potentially millions of individuals will drop coverage and premiums will increase substantially," the brief by the American Academy of Actuaries (AAA) said, "unless other equally strong mechanisms are implemented that would encourage participation by a broad cross section of risks."

The analysis evaluates ideas in a bill put forth by Wisconsin Senator Ron Johnson and 31 Republicans that wouldc preserve—through August 2017—the Obamacare premium tax credits that some 7.5 million Americans might lose if the Supreme Court rules against the government in King v. Burwell next month.

The legislation also repeals the health care law's individual mandate, which the AAA brief said would exacerbate the problems, as it "could result in adverse selection that would raise premiums and threaten the viability of the market." In plain English, that means healthier people would drop their coverage and leave insurance companies caring for sicker people, causing them to raise premiums—what health economists call a "death spiral."

While Johnson's plan has the support of Senator Majority Leader Mitch McConnell, Republican of Kentucky, it isn't faring well with House Republicans. Other Republican contingency options have even less support, leaving open the question of whether the party will unite behind any solution. 

"If the Supreme Court rules, as the law clearly states, that those subsidies don't flow through the federal exchange, we're recognizing the reality that that's going to be a mess," Johnson told Bloomberg earlier this month. "We could be looking at a moment of chaos."

The AAA analysis hints at the reason. It warns that swift elimination of the subsidies would cause "massive disruption" in the individual market, adding that up to "millions of people would drop coverage, and the average costs of those remaining insured would soar."

At issue in the King case is whether text of the Affordable Care Act prohibits premium tax credits for Americans in some three-dozen states who buy coverage from the federal marketplace. If the tax credits are erased, insurance would become unaffordable for millions of Americans.

The case is a double-edged sword for Republicans, many of whom have asked the Supreme Court to invalidate the subsidies. Such a ruling would deal a major blow to President Barack Obama's signature legislative achievement, but it would also put Republicans—both in Congress and on the 2016 presidential stage—on the hook for offering a plan for the millions of Americans who would likely lose their coverage or face a spike in premiums.

"I think it's a pretty big concession on our part," Johnson said of his proposal to temporarily continue the subsidies, which some House conservatives criticize as a ratification of Obamacare. The senator, who will likely face a tough reelection battle in 2016, said failing to respond would "of course" endanger Republicans in the election, as Democrats would blame them for causing many Americans to lose their insurance.

Senator Patty Murray, Democrat of Washington, previewed the potential attacks from her party. "This analysis," she said Thursday, "shows yet again that when it comes to our health care system, Republican policy is to put politics first—ahead of families who would lose access to affordable health care coverage and face higher premiums and uncertainty under Republican proposals."

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