Plan B needed for Obamacare subsidies
The U.S. Supreme Court has decided to rule on a case next year that has the potential to take away the subsidized health care coverage promised to millions of Americans under the Affordable Care Act.
The haste and carelessness with which the law was passed has resulted in federal agencies stepping outside their legal authority to make the convoluted system work, particularly in states like Michigan, which didn't set up an exchange.
Should King v. Burwell succeed in court, Michiganians and others in more than 30 states without exchanges will lose their subsidies for insurance from the federally-run exchange. The federal exchange was the only avenue individuals in Michigan could use to avoid Obamacare's tax penalties by receiving subsidies to cover costs, or so they thought.
King will decide whether or not the actual language of the law — that subsidies for insurance can only flow through exchanges "established by the State" — means subsidies given to subscribers on the federal exchange are legal.
The outcome of the case might upend health insurance for an estimated 270,000 people in Michigan who receive federal exchange subsidies.
More broadly, the fundamental premise of Obamacare — healthcare coverage for all Americans, regardless of their ability to afford it — will be impossible to implement in any state that hasn't established an exchange.
Granted, the original intent of the law was to give incentives to states to participate by setting up their own exchanges and subsidizing their residents. Though it seems obvious the language applies only to state exchanges, the IRS decided it could extend it to the federal exchange as well, and began enrolling individuals with subsidies, creating the current complication.
Subscribers in Michigan who receive subsidies on the federal exchange should start looking for alternative coverage.
Fortunately, the Legislature enacted Healthy Michigan in April. The expanded Medicaid program provides healthcare coverage at a very discounted rate, with co-pays in the single digits, to enrollees with a household income up to 133 percent of the federal poverty line. That's an option for some of those whose subsidies could be revoked.
The Legislature could also appeal to the federal government for permission to set up a state exchange. But the deadline to do so has passed, and it would require exceptions to the law to implement at this late date.
States like Michigan had the right to resist Obamacare's implementation by refusing to set up an exchange. The state wisely wanted to avoid being tied up in a law riddled with complications and fiats from the federal government.
If the IRS had remained within its authority and provided subsidies only to those in states with exchanges, millions of Americans would not now be facing the prospect of having their subsidized insurance taken away from them.
Michigan lawmakers should prepare a Plan B to help those who may lose their subsidies.