The online marketplace is a central part of the Affordable Care Act. It’s where 27-year-old Kathryn Ryan, a restaurant server in Philadelphia, immediately turned for health insurance coverage.
“I was excited because if it weren’t for Obamacare, I wouldn’t be insured at all. I wouldn’t have the ability to go to the doctor,” she says.
She can afford it thanks to a $200 a month federal subsidy that brings her premium down to $60 a month. Ryan, who is studying social work, is one of nearly 350,000 Pennsylvanians who have qualified for income-based subsidies. But like a lot of people, she had no idea that those subsidies are at risk.
When she found out, she says, “My heart has sank a bit to the bottom of my stomach because I was planning on keeping this insurance until I am gainfully employed with an agency that offers benefits.”
Subsidies for Ryan and more than 6 million other customers across the country are at stake in a lawsuit before the Supreme Court. Critics of Obamacare who brought the case argue that one passage in the health law saying subsidies are available to people who sign up through “an exchange established by the state” means that the payments can be used only in states that set up their own marketplace, often also called an exchange.
That would mean anyone purchasing a policy through the federal online insurance marketplace, healthcare,gov, is not entitled to a subsidy. About three dozen states have opted not to set up their own marketplace and instead use the federal system.
A decision is expected this month.
If the Supreme Court agrees, Trish Riley with the National Academy for State Health Policy says the loss of subsidies would cause many healthy people to give up their insurance because it would be too expensive. That would disrupt the risk pool. Then “premiums go through the roof,” she says, and only people who are sick and need expensive care would keep their insurance.
“The whole individual market … could collapse,” she says.
Pennsylvania is one of those states using the federal marketplace and officials are working on a back-up plan, in case the court strikes down subsidies. Gov. Tom Wolf sent a blueprint to federal officials this month.
“My biggest concern is, do we have a fallback if we need it,” says Wolf.
He stresses the plan is non-binding and hinges on how the court rules. The state’s insurance commissioner, Teresa Miller, says the process was a bit rushed.
“It’s forcing us to put together a plan that frankly most states spent years developing, and essentially we’re having to do that in months,” she says.
Under the plan, the state would oversee the funding and regulations while still using the healthcare.gov platform, but it’s not clear if or how the exchange operation would change or when the switch would happen.
Pennsylvania is one of the few states publicly making plans.
“Pennsylvania stands out,” said Joel Ario, a consultant with Manatt Health Solutions who used to work for the Obama administration to help set up the federal marketplace.
He says many state officials may be exploring options behind the scenes, but supporting a plan at this point “is a political nonstarter” for at least a third of states with federal marketplaces, especially states run by Republicans.
That’s because it means, he says, “standing up and saying, ‘I want to work with this law in a public way in a state-based exchange.’”
In some conservative states, there is no interest in embracing the health law, even if the court’s decision has a strong impact on consumers. Arizona even enacted legislation prohibiting a state-based marketplace, with similar bills pending in several other states.
In New Jersey, a Department of Insurance spokesperson says it’s too soon to talk about alternative plans. Officials in Delaware also have been exploring options. As a contingency, the state has submitted a plan for a state-supported marketplace.
“We haven’t shut any door, and we haven’t made a definitive answer just yet,” said Rita Landgraf, Delaware’s health and social services director.
“Eighty-four percent of those who purchased plans on the marketplace received a financial subsidy, so [it] is critically important to our constituency that those subsidies are available to them,” Landgraf says.
Delaware officials also considered joining a regional marketplace with other states, but it was too complicated.
Both the Delaware and Pennsylvania proposals would still use that federal IT system and the healthcare.gov website, although each state would oversee marketplace funding, consumer assistance and insurance plan regulations.
Riley, with the academy for state health policy, says it would be hard at this point for any state to set up a “full-fledged” state-based marketplace, which would include developing its own IT platform and eligibility structure for subsidies.
“That’s a very big lift, and the states that set those up [already] got significant federal help to do so,” she says, adding that such funding is no longer available. “It takes a long time.”
As for Kathryn Ryan, the Philadelphia waitress, the thought of these possible disruptions with her coverage “is all nerve-wracking,” as she finally is starting to figure out how her insurance plan even works.
“I hope it just stays the way it is,” she says.
This story is part of a reporting partnership with NPR, WHYY and Kaiser Health News.