Fitch: SCOTUS Review of ACA Subsidies Will Have Mixed Impact

NEW YORK--()--If the US Supreme Court (SCOTUS) decides against tax subsidies for some Affordable Care Act (ACA) health insurance exchange enrollees, Fitch Ratings would expect a mildly negative impact on hospitals and health insurers. The impact would be mitigated by the clarity brought by a SCOTUS decision. The ongoing legal challenges have increased uncertainty for insurers, healthcare providers and consumers as the date of the second open enrollment period for the exchanges approaches on Nov. 15.

The federal government operates ACA exchanges in 36 states. The SCOTUS decision to hear the challenge to the subsidies increases the likelihood that some type of workaround solution in those states will be discussed and could be deployed if the court decides against subsidies. Despite ongoing political opposition to the ACA, the initial experience of many consumers in the exchanges has been positive. Thus, a solution may be brokered to remove any threat that enrollees will lose their subsidies. During the first open enrollment period, about 85% of exchange enrollees qualified for a tax subsidy.

If SCOTUS determines the subsidies are illegal, workaround solutions in the affected states would support the sustainability of the initial benefits of the ACA for hospitals and insurers. However, even in this scenario, the risk to for-profit hospitals is relatively small as patients with exchange coverage currently make up a tiny portion of overall patient volumes. The risk to nonprofit hospitals may be slightly higher as exchange enrolled patients currently make up a small, but likely increasing, portion of overall clinical volume.

A decision that renders subsidies illegal would also be negative for health insurers as it would increase consumers' out-of-pocket cost of health insurance and reduce demand for an insurance product that is expected to be modestly profitable.

Additional information is available on www.fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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Megan Neuberger
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+1 212-908-0501
or
Mark Rouck
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+1 312-368-2085
or
Emily Wadhwani
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Rob Rowan
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or
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Contacts

Fitch Ratings
Megan Neuberger
Senior Director
Corporate Finance
+1 212-908-0501
or
Mark Rouck
Senior Director
Insurance
+1 312-368-2085
or
Emily Wadhwani
Director
U.S. Public Finance
or
Rob Rowan
Senior Director
Fitch Wire
+1 212-908-9159
or
Media Relations:
Elizabeth Fogerty, +1 212-908-0526
elizabeth.fogerty@fitchratings.com