King v. Burwell — The Actuaries Explain All

In the late 1980s, Dr. William Hsiao, a colleague of mine at the Harvard Chan School of Public Health, my former professor, and a globally renowned health economist, explained to me the difference between an accountant and an actuary.  “An actuary is an accountant with a sense of humor,” said he.  Since then, I’ve carried large respect for the professionals who call themselves actuaries.

Their association, the American Academy of Actuaries, has published an issue brief that demands attention: “Implications of Proposed Changes to the ACA in Response to King v. Burwell.  King v. Burwell, if you don’t know, is the case currently before the U.S. Supreme Court that challenges the legality of insurance subsidies being provided to eligible health care consumers in states with federal as opposed to state health insurance exchanges.  A decision is expected in late June.

Straight shooters, they are.  Here are excerpts from their conclusions:

“If federal premium tax credits become no longer available in FFM (federally facilitated marketplaces) states, enrollment in the individual market would decline precipitously among those previously eligible for premium assistance.  Moreover, individuals with high-cost health care needs would be more likely to remain enrolled, while individuals with low-cost health care needs would be more likely to exit the market.  Such adverse selection would cause average health costs, and therefore premiums, to rise…”

“Potentially millions of people would drop coverage, and the average costs of those remaining insured would soar.  Insurers could face solvency concerns, especially those for whom exchange business is a relatively large share of their book of business…”

“…extending the premium subsidies through the 2016 plan year (or longer) could help mitigate these concerns for the short term. … However, if subsidies are made available only to those already receiving them, individuals who would be newly eligible for subsidies, due for instance to a change in income or loss of employer-sponsored coverage, would not benefit from the temporary premium subsidy extension.  This would lead to lower overall enrollment in the individual market, as some individuals would transition out of coverage, but few would transition in…”

“Even if a temporary extension of premium subsidies would help avoid disruption in the short term, it is likely that the disruption would only be delayed, not avoided altogether.  If the subsidies are ultimately eliminated, potentially millions of individuals will drop coverage and premiums will increase substantially…”

“Weakening or eliminating the individual mandate could result in adverse selection that would raise premiums and threaten the viability of the market … although such voluntary incentives would provide incentives for healthy individuals to obtain coverage when first eligible, they would likely not be as effective as a strong individual mandate.”

A lot of damage would be done.  Anyone who suggests they know how the Court will decide is deluded.  No one, no one, predicted the outcome of the 2012 SCOTUS decision on the constitutionality of the individual mandate.  No one knows the outcome of this case either.  But, thanks to the Actuaries, we do know the results of a decision against the government.

Author: John McDonough

I offer insights and opinions on how to improve health care systems for everyone

One thought on “King v. Burwell — The Actuaries Explain All”

  1. Great post. I disagree on one thing. We DO know which way they are going to vote. The GOP-appointed justices are far too politically savvy to overturn ACA at this point and throw their whole party into chaos. They’ll caucus and the least reticent of them will be assigned the task of swing-voting.

    If InTrade were still allowed to exist you’d be looking at 5-to-1 odds, I suspect.


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