A.M. Best Briefing: U.S. Supreme Court Case on Health Care Subsidies for Federal Exchanges Could Negatively Impact Marketplace

OLDWICK, N.J.--()--

A.M. Best has issued a Best’s Briefing on a pending U.S. Supreme Court case involving the Patient Protection and Affordable Care Act (PPACA) that could potentially have a negative impact on consumer plan pricing within the federal exchange.

A key legal question raised in the case of King v. Burwell regards an Internal Revenue Service decision to allow subsidies in the form of premium credits for individuals who enroll in either federal or state-based exchanges. PPACA specified that a health insurance exchange is established by a state; however, when many states opted not to establish these exchanges, individuals were left to secure coverage though a Federally Facilitated Marketplace and were able to use these subsidies.

Should the Supreme Court decide that the use of these health insurance subsidies in federal exchanges complies with the law, no material changes are expected in the way this market operates. A ruling that prohibits the use of such subsidies by federal exchange customers would prompt many of these individuals to drop coverage over affordability concerns, and cause the risk pool to deteriorate as those who are sicker and/or heavier utilizers keep their coverage.

“Consequently, carriers may exit the federal exchange market over concerns about the ability to adequately price the product for the risk that is expected to remain,” according to the briefing.

Large rate increases would likely result in order to offset the increased risk. A.M. Best will have discussions with health insurers regarding this court case and explore with the respective companies possible reactions to any potential ruling that eliminates subsidies for federal exchange customers.

For the full copy of this briefing, please visit: http://www3.ambest.com/bestweek/purchase.asp?record_code=231047.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

Copyright © 2014 by A.M. Best Company, Inc. ALL RIGHTS RESERVED.

Contacts

Sally Rosen, 908-439-2200, ext. 5280
Assistant Vice President
sally.rosen@ambest.com
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Andrew Edelsberg, 908-439-2200, ext. 5182
Vice President
andrew.edelsberg@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com

Contacts

Sally Rosen, 908-439-2200, ext. 5280
Assistant Vice President
sally.rosen@ambest.com
or
Christopher Sharkey, 908-439-2200, ext. 5159
Manager, Public Relations
christopher.sharkey@ambest.com
or
Andrew Edelsberg, 908-439-2200, ext. 5182
Vice President
andrew.edelsberg@ambest.com
or
Jim Peavy, 908-439-2200, ext. 5644
Assistant Vice President, Public Relations
james.peavy@ambest.com