Study: GOP win in ObamaCare suit would hike spending

A new study indicates that a favorable ruling for House Republicans in their ObamaCare lawsuit would cause a large disruption, but would not cripple the law.

{mosads}The study from the Urban Institute finds that if Republicans win in the case of House v. Burwell, cutting off certain payments to insurers under the health law, insurers would face a major adjustment and have to hike premiums, but government subsidies would increase to help make up the difference and the system would likely not face major negative consequences. 

The House is challenging ObamaCare’s “cost sharing reductions,” which are payments to insurers to reimburse them for picking up more of the cost for lower-income ObamaCare enrollees. Even if the House wins the lawsuit, insurers would still be mandated to give extra help to lower-income people, they would just no longer get reimbursed by the government for doing so. 

Therefore, the Urban study projects that insurers would hike premiums to make up the lost money. However, a corresponding increase in government subsidies would shield people from paying the cost of these higher premiums. 

In fact, the study projects that there would be some benefits in the eyes of ObamaCare supporters from a ruling for the Republicans. 

The study projects that the premium increases would largely come on “silver”-level insurance plans, but the subsidies would be going up for all plans. Therefore, the study projects that 700,000 people who previously did not enroll in ObamaCare coverage because they weren’t getting enough financial help would now be getting a better deal and could enroll in high quality “gold” plans. 

In other words, the court ruling could have the unintended effect of increasing financial assistance under the law. The study projects that 400,000 fewer people would be uninsured as a result. 

The main losers from a ruling, the study suggests, would be insurers, who would face an upheaval, and the government, which would have to pay out $47 billion more over ten years in higher subsidies to make up for the higher premiums. 

But overall, the stakes are not incredibly high, said Linda Blumberg, one of the authors of the study. 

“This is not a case that raises the same kind of specter of undermining the main tenets of the law that King v. Burwell did,” Blumberg said, referring to a Supreme Court case that could have crippled the law last year. 

She said she wasn’t sure what the point of the lawsuit was, since that the study indicates it would not have a major negative or positive effect on ObamaCare but would cause a disruption as the marketplace adjusts to the new rules.

“You’re risking some significant disruption with no real gain, from my perspective, on either side,” she said.   

However, she said that while the study projects no major long-term effects, the disruption of cutting off the cost-sharing reductions could have unforeseen consequences, especially if it was not delayed to give insurers time to adapt. 

Insurers, for example, could just get fed up with participating in the ObamaCare marketplaces. 

“Insurers might get tired of this constant changing of the rules and uncertainty and court cases,” she said. 

Republicans say that the lawsuit is needed to check President Obama’s executive overreach. They argue in the case that Obama overstepped his constitutional powers by making the cost sharing reduction payments even though Congress did not appropriate the money.

The administration counters that it did not need a yearly appropriation from Congress because the funds were permanently appropriated under ObamaCare. 

The case is making its way through U.S. District Court in Washington. A ruling in that lower court could come in the middle of this year, though the ruling is expected to be appealed either way.