OPINION:
Last week health insurers announced they will hike premiums on Obamacare plans by double digits in 2016. That’s not a problem for consumers eligible for Obamacare’s taxpayer-funded subsidies. Their cost is calculated based on their income.
It’s you — the taxpayers — who get gouged when premiums are hiked, because you foot the bill for the subsidies. That makes the Supreme Court ruling in King v. Burwell, expected some day this month, even more consequential. It will determine the fate of these subsidies. Without them, Obamacare buyers in 37 states will have to pay the actual — and unaffordable — sticker price of Obamacare. And taxpayers will be off the hook for hundreds of billions of dollars over the next decade.
Democrats are predicting disaster if the court rules against President Obama. Republicans will “rue the day” they let millions of people lose their subsidies, says House Minority Leader Nancy Pelosi. That’s crazy talk. No one will lose their coverage immediately, the poor will be unaffected, and the biggest losers will be insurance companies. Employers, job seekers and taxpayers stand to win. In addition, most Republicans in Congress are inclined to compromise with the president to provide some type of financial help for insurance buyers. Here’s how it would shake out:
The Affordable Care Act says subsidies will be provided only in states that set up their own exchanges. But only a handful of states (including New York) did. In 37 states that didn’t, people use the federal Healthcare.gov website instead. The Obama administration handed out subsidies to these people anyway, playing fast and loose with the law and your money.
If the justices rule that the Obama administration can’t do that, some 7.7 million people will eventually lose their subsidies.
Eventually, but not soon. During oral arguments, Justice Samuel Alito suggested that if the court makes such a “disruptive” ruling, it could delay it taking effect. And Justice Antonin Scalia told the Obama lawyers, “If the consequences are as disastrous as you say, so many million people without — insurance and whatnot,” Congress will come up with a remedy.
Insurance companies are lobbying furiously for a congressional fix. The dirty secret is that insurers stand to lose the most from King v. Burwell. The Affordable Care Act compels the public to buy their product, and forces taxpayers to subsidize it. What a sweetheart deal. The giant players — United Healthcare, Cigna, Aetna, Anthem and Humana — have seen their stock prices double, triple, even quadruple since the law was passed in 2010. The coming ruling threatens to put an end to their gravy train.
Meanwhile outside Washington D.C., a ruling against the subsidies will benefit employers and job seekers. Any of the 37 states that wants to can set up an exchange and immediately qualify for the subsidies. But most are controlled by the Republican Party and won’t do it. Without subsidies, the employer mandate is toothless, because employers are only fined for not offering coverage if their workers go to an exchange and get a subsidy. Nullifying the impending employer mandate, scheduled to take effect Jan. 1, 2016, would likely ignite a hiring boom.
According to the U.S. Chamber of Commerce, that looming mandate has caused 21 percent of small business to reduce workers’ hours, 41 percent to delay hiring, and 27 percent of franchises (such as fast food restaurants) to replace full-timers with part-timers.
People facing a penalty for being uninsured will also be winners. Without subsidies, most will be exempted from the penalty, saving them $2,000 on average next year.
Despite Democrats’ dire warnings, the poor won’t be hurt. An amazing 89 percent of people who were uninsured before Obamacare and gained coverage under the law are on Medicaid, which will not be affected.
Ignore the alarmist rhetoric. A loss for the Obama administration in King v. Burwell will be a win for most Americans.
• Betsy McCaughey is a senior fellow at the London Center for Policy Analysis.
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