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Affordable Care Act

$4.8B in FL Subsidies at Stake

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A court case challenging the Affordable Care Act's subsidies for plans sold on the federal marketplace could have an outsize effect on Florida, according to a new analysis.

A ruling is expected any day on Halbig v Burwell from a three-judge panel of the U.S. Court of Appeals in Washington, D.C. If the government loses and further legal maneuvers fail, the 34 states that rely on the federal exchange would see a $36-billion loss of subsidies, three Urban Institute researchers project.

The effects in Florida would be huge, says the study, sponsored by the Robert Wood Johnson Foundation and released on Thursday.  Here, 983,775 people would lose a total of $4.8 billion in subsidies for health insurance. (Editor's note: The number of people affected was said to be slightly less in the report, but has since been updated based on new federal data.)

The researchers say most of those people would find premiums unaffordable without subsidies and would become uninsured. That would lead to a collapse of the federal marketplace.

Only Texas, in which more than 1 million people stand to lose an estimated $5.6 billion in subsidies, would feel a greater impact, the study says.

Opponents of Obamacare have great hopes for Halbig v Burwell because it would not just hamper the law somewhat, as the "Hobby Lobby" case did, but actually unravel it.  Hobby Lobby, a family-run chain that sells craft supplies, objected to the requirement that its benefit plan include certain contraceptives. A  majority of the U.S. Supreme Court last month sided with the company.

In an op-ed in The Los Angeles Times,  George Washington University law professor Jonathan Turley wrote,  "If Hobby Lobby will create complications for Obamacare, Halbig vs. Burwell could trigger a full cardiac arrest."

"If the ruling goes against the White House, it's hard to overstate the impact," Turley wrote. "Without subsidies, consumers in 34 states would face huge additional costs and, because of those costs, potential exemptions from the law."

The plaintiffs' main argument is that the Patient Protection and Affordable Care Act (ACA) allows the tax credits that subsidize coverage to be used only in state-run marketplaces, not in the one operated by the federal government. At the time Congress wrote the law, the assumption was that states would want to operate their own markets.

However, it turned out that most did not want to, including Florida. They relied on the back-up vehicle, a federally run market through Healthcare.gov. In implementing the law, the Internal Revenue Service construed the tax credits to apply to both state and federal exchanges.

The subsidies were a big hit in Florida, where about 4 million people -- most working in jobs that had no benefits -- were uninsured. Demand for subsidized coverage was great: nearly 1 million Floridians signed up through the federal marketplace for 2014, the first year of implementation.

As Health News Florida reported, 90 percent qualified for subsidies, which  averaged $3,000. The average premium for a Floridian ended up being $82 a month, a large discount from the retail price.

The subsidies were available to those with taxable family incomes from one to four times the poverty level, so the discounts were greatest for those at 100 percent of poverty: about $11,500 for an individual and  $46,000 for a family of four. 

Floridians with incomes below the poverty level don't qualify for the help, despite their poverty. The health law was written to cover them through expansion of state Medicaid programs. The Supreme Court, which upheld the law overall, set aside the requirement for Medicaid expansion and said states could decide whether to implement the expansion.

The federal government offered 100 percent funding in the first three years and at least 90 percent after that, but Florida has declined to participate.

As the study released Thursday found, the disappearance of subsidies would mean many people could not comply with the requirement that most Americans have health insurance coverage (the "individual mandate"). There is a penalty for not having coverage, but there is an exemption for those who would have to pay more than 8 percent of their family income for premiums.

If the Appeals Court decides that tax credits apply only to state-run exchanges, states that abstained could change their minds and create one. But it is far from certain they would do so, for practical reasons as well as politics.

For example, several state-created exchanges flopped. Even in states that succeeded, the cost per enrollee was much higher than in states that used Healthcare.gov, according to a study released in May.

The case now pending was originally styled Halbig v Sebelius because it was filed while Kathleen Sebelius was secretary of the Department of Health and Human Services. She resigned in April, and was replaced by   Sylvia Mathews Burwell. The Senate confirmed Burwell last month.

The study released Thursday -- Halbig v Burwell: Potential Implications for ACA Coverage and Subsidies -- was written by Linda Blumberg, John Holahan and Matthew Buettgens of the Urban Institute, a non-partisan and non-profit public policy research center.