'Ugly' potential fallout from Supreme Court health care case

WASHINGTON -- A Supreme Court ruling due in a few weeks could wipe out health insurance for millions of people covered by President Barack Obama's health-care law. It's Republicans who have been talking about damage control.

A likely reason: Twenty-six of 34 states that would be most affected by the ruling have Republican governors, and 22 of 24 GOP Senate seats up in 2016 are in those states.

Obama's law offers subsidized private insurance to people without access to it on the job. In the court case, opponents of the law argue its literal wording allows the federal government to subsidize coverage only in states that set up their own health-insurance markets.

Most states have not done so, because of partisanship over "Obamacare" and in some cases because of technical problems. Instead, they rely on the federal Healthcare.gov website.

If the court invalidates the subsidies in those states, an estimated 8 million people could lose coverage. The results would be "ugly," said Sandy Praeger, a former Kansas insurance commissioner.

"People who are reasonably healthy would just drop coverage," she said. "Only the unhealthy would keep buying health care. It would really exacerbate the problem of the cost of health insurance."

If the subsidies are overturned, the shock could carry into next year's elections. Potential consequences:

Bad timing

Around the time the court announces its decision, insurers will work to finalize premiums and plans for the coming year.

Contracts with the government for 2016 health-law coverage have to be signed by early fall.

If the subsidies are overturned, insurers would have to tear up projections about markets in more than half the states.

Populous states such as Texas, Florida, Ohio, Illinois, New Jersey, Georgia and Pennsylvania would be among those affected.

State lawmakers could mitigate the effect by setting up their own insurance markets, or exchanges. But that can't be done overnight.

House of cards

The health law was designed as a balancing act. Insurers can't turn people away because of health problems, but most healthy people are required to contribute to the insurance pool, and the government subsidizes most of the premium for low- to middle-income households.

Take away subsidies, and the other two parts become unstable.

Insurers would demand relief from provisions of the law intended to limit premium increases, or they might drop out of the insurance exchanges.

Sticker shock

Many people buy individual health care policies directly from an insurance company, bypassing the law's markets and paying the full cost. They tend to be small-business owners, self-employed professionals and early retirees.

Even they would not escape the tumult in states losing subsidies.

If healthy people exit the insurance exchanges in droves, premiums for those buying directly would go up. Some may be unable to afford the higher cost.

"It would set off cascading events," said Larry Levitt of the nonpartisan Kaiser Family Foundation. "The individual market would empty out as premiums rise significantly."