If the entire Affordable Care Act were struck down as unconstitutional – as a federal judge ruled on Dec. 14 – the consequences for New York’s health-care system, and the state budget, would be significant.
Assuming the decision is upheld on appeal (which many experts doubt), and assuming Congress does not intervene, the state would lose almost $8 billion in federal aid that subsidizes coverage for more than 4 million residents.
People with pre-existing conditions would still have the right to buy coverage without penalties under state law. However, the end of premium tax credits would mean dramatically higher costs for lower-income consumers, which could restart a “death spiral” in the state’s non-group insurance market.
Meanwhile, insurers and employers would no longer have to pay ACA taxes and penalties, and hospitals would dodge ACA-mandated cuts in funding for safety-net hospitals.
These changes are not happening right away, and they might never happen at all. The judge refrained from ordering immediate action, and the director of the federal Centers for Medicare & Medicaid Services, Seema Verma, has said the ACA remains in force “with no impact to current coverage or coverage in a 2019 plan.”
Still, thinking through the possibilities shows how deeply embedded the 2010 law has already become in New York’s health-care infrastructure. Here is a summary of how New York would be affected:
The ACA encouraged states to expand Medicaid to cover residents up to 138 percent of the federal poverty level, with the federal government paying most of the additional cost for newly eligible recipients. States that already had broad programs, like New York, also received extra aid for a share of previously eligible people.
As of federal fiscal year 2016, New York’s extra aid amounted to $3.1 billion, or about 5 percent of the program’s total budget. That amount subsidized coverage for about 500,000 newly eligible enrollees, and about 2.9 million previously eligible enrollees.
To continue coverage at current levels, the state would need to backfill the $3.1 billion with its own resources.
If eligibility reverted to its pre-ACA levels, 500,000 recipients would lose coverage and the state would need to replace about $1.8 billion.
This program is an optional benefit under the ACA, exercised only by New York and Minnesota, which provides low-cost coverage to individuals up to 200 percent of the federal poverty level. States receive federal aid equal to 95 percent of the value of tax credits that enrollees otherwise would have received for buying coverage on the ACA exchange.
New York currently receives $4 billion in federal aid for the Essential Plan – paying virtually the entire cost – and the program covers 734,000 people. If the ACA is struck down, the state would likely have to end the plan.
However, 250,000 of its enrollees are legally present immigrants under the poverty level, who are legally entitled to state health coverage under court order. The state would have to enroll them in Medicaid without federal assistance, which would cost $1 billion or more.
Premium tax credits:
Approximately 149,000 New Yorkers receive ACA tax credits to offset the cost of buying non-group coverage through the state’s insurance exchange, known as the New York State of Health. According to data provided by the exchange, those credits are worth an average of $296 per month – or about $530 million per year in total.
Another 9,477 are covered through small-business plans purchased through the state exchange. How much these plans are subsidized is not clear from the exchange’s enrollment report.
New York has its own laws, dating back to the 1990s, that bar insurers from refusing coverage or charging higher premiums based on a consumer’s pre-existing medical conditions – laws that would remain in force regardless of the ACA’s fate.
In the absence of premium subsidies, however, those laws can have a dangerous effect: They drive up costs for younger, healthier consumers, causing them to leave the market, which leaves behind an older sicker risk pool, which drives up claims, which triggers further premium hikes, and so on – a so-called adverse selection “death spiral.”
New York was caught in such a spiral before the ACA, and would risk falling back into one if the law is struck down.
Because the ACA was meant to increase the insured population, it also cut Medicaid funding for hospitals that provide uncompensated care for the poor and uninsured. After being repeatedly postponed by Congress, cuts in the so-called Disproportionate Share Hospital program would cost New York hospitals $1.7 billion in federal aid in 2020.
The end of the ACA could head off those reductions. However, the likely decline in the insured population would also mean a loss of other revenue for hospitals.
Taxes and penalties:
To pay for coverage expansion, the ACA levied billion in taxes on businesses and insurers and penalties on large employers who failed to offer health benefits–some share of which were paid by New York companies. All of these taxes would be rescinded if the ACA were struck down.
Not all of the subsidized New Yorkers would necessarily go uninsured. The state would be legally obliged to provide coverage for legally present immigrants, and would probably continue offering Medicaid to those who would have been eligible before the ACA. That’s a total of about 3.1 million people at an additional cost to the state of $3.1 billion.
However, the coverage of about 1.2 million New Yorkers would be canceled or jeopardized. This would include about 520,000 newly eligible Medicaid recipients, 480,000 Essential Plan members and 149,000 people who buy subsidized coverage through the exchange.