The U.S. Supreme Court’s expected June ruling on whether the federal government can subsidize purchases through a federally created health insurance marketplace could trigger a “death spiral” for the Affordable Care Act (ACA) if the court halts the practice, observers say.
The Court heard arguments last week in King v. Burwell, the case that challenges the legality of the subsidies. Chief Justice John Roberts and Associate Justice Anthony Kennedy are expected to be swing votes on the decision.
At the heart of the issue is language in the law that creates individual eligibility for subsidies in marketplaces “established by the State…” ACA opponents say Congress intended this wording to encourage states to set up their own exchanges. But the Obama administration disputes this claim and has argued that the sentence must be read in the context of the full law.
Currently, 34 states rely on the federal government to operate the health insurance marketplace and 87 percent, or about 7.5 million, individuals in these states who applied for coverage also qualified for a subsidy. If the Court rules against the subsidies and Congress takes no action to reinstate them, the ACA would fall into a “death spiral” of sharply higher premiums and steep declines in marketplace enrollment, the RAND Corp. predicted in a recent study.