RAND Corp: If SCOTUS rules for plaintiffs in King, 9.6M are screwed, everyone else gets a 47% rate hike

Hat Tip To: 

Last week I noted that if the Supreme Court rules in favor of the plaintiffs in the King v. Burwell case (challenging the IRS tax credits given to over 85% of enrollees via the Federal exchange, Healthcare.Gov), around 7 million people would have their tax credits yanked away.

Of these, I figured that perhaps 5-6 million are receiving substantial credits--that is, a family making $90,000/year would be among those 7M, but they'd only be getting perhaps $5 - $10/month in credits, so losing a couple hundred dollars a year would be annoying, but not devastating.

However, I also noted that in addition to the 5-6M who would be directly impacted, there would also likely be a major ripple/domino effect which would seriously impact others in those states as well, even those who aren't receiving the credits themselves:

5-6 million customers across 37 states will suddenly be unable to afford their shiny new policies, and at the same time will no longer be legally required to have them. Many of them will thus drop their coverage, meaning quite a few insurance companies would lose upwards of 70-80% of their customer base.

Furthermore, the other 20-30% would likely have a much higher percentage of people with truly serious medical issues, in turn causing the very "death spiral" of increasing premiums which ACA opponents claimed would happen if the law operated under the current situation (but which never happened).

In other words, the "death spiral" didn't happen the way they thought it would, so they're making damned sure that it does happen by tearing the law apart any way they can.

Kelly's point here is that while some of the larger companies (Blue Cross, Aetna, etc) which also have huge stakes in other types of coverage (large group, small group, etc) may stick it out in those states, the smaller ones may be forced to pull out of those states entirely. In fact, even the big guys might partially pull out, keeping their other coverage but eliminating individual/family policies entirely.

The ripple effect of this could, theoretically, potentially even undermine the entire private insurance industry in the U.S., as I understand it.

I didn't get into speculating about what the actual numbers from this scenario might be, because I don't know enough about it to make an informed guess (plus, it would take a lot of time to do even if I had the know-how).

However, the folks over at the RAND Corporation do know about this stuff, and do have the time (and budget) to run these sorts of numbers...and they just came up with an answer:

Key Findings

Enrollment in the Patient Protection and Affordable Care Act (ACA)–Compliant Individual Market Would Decline Significantly in Federally Facilitated Marketplace (FFM) States

Individual-market enrollment would decline by an estimated 70 percent, or 9.6 million people.
This decline includes plans sold in the marketplaces and those sold outside of the marketplaces that comply with ACA regulations.

Unsubsidized Premiums in the ACA-Compliant Individual Market Would Increase 47 Percent in FFM States

This corresponds to a $1,610 annual increase for a 40-year-old nonsmoker purchasing a silver plan.

Yep, that's right: According to the RAND Corporation, 9.6 million people across 34-36 states (depending on how Oregon & Nevada are defined) would lose their health insurance, cancelling out most of the drop in uninsured over the past year.

In addition, the premium rates for everyone else in those states would jump a whopping 47%.

Bravo, Republicans! Bravo!

UPDATE: I should also note that "everyone else" in this case refers to "everyone else in those 34-36 states". Presumably there would be minimal impact on the states which set up their own exchanges, representing about 1/3 of the country. Then again, it's possible that the ripple effect could impact those states as well. How? I can think of several ways, including:

  • Financial damage to multi-state insurance corporations in one state impacting their policy/pricing decisions in others
  • Substantial numbers of people moving to one of those states from an impacted one in order to acquire coverage at a decent price
  • ...etc.