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On Wednesday, the Affordable Care Act faces its next test in front of the Supreme Court. This time, the justices will consider who is eligible to receive subsidies to help cover the cost of health insurance.
That may sound technical, maybe even minor, but it’s high stakes — because the subsidies are at the heart of the law.
To help understand why this case matters, it helps to understand the role subsidies play in the Affordable Care Act. Think of the subsidy as a passenger on a cruise — with apologies to The Love Boat. The journey begins at what we’ll call Consumer’s Cove, which in this case is Thomas Choinacky’s computer.
“I put in how much money I’m going to make in the coming year and it literally shoots out how much you would be paying in a given month,” Choinacky says.
Choinacky, a performance artist in Philadelphia, will earn about $30,000 this year. He liked a plan on healthcare.gov, running $300 in monthly premiums — but it only costs the 30-year old half that, thanks to a $150 subsidy.
As soon as Choinacky chooses his plan, our subsidy ships off towards its second port, Insurance Island. And remember in the 34 states that rely on healthcare.gov, 87 percent of consumers get some financial help.
“The bottom line is that the subsidy is Thomas’s ticket to the health insurance world,” says Dr. Peter Beilenson, CEO of health insurer Evergreen Health Cooperative.
On average, these subsidies make up about three-quarters of a person’s monthly premium. It’s a big reason why 7.5 million in the federal exchange states signed up for the ACA this year.
But, Larry Levitt with the Kaiser Family Foundation warns subsidies shouldn’t get too comfortable out on Insurance Island.
“Most of the dollars an insurance company takes in don’t stick around for very long,” he says.
Levitt explains insurers are packing up the subsidies fairly quickly for their final stretch, a visit to Provider Paradise – where they go to pay for doctors, hospitals and pharmacists.
“They are really important to health providers. We are talking about roughly $2 billion a year going through insurance companies to doctors and hospitals in these states,” he says.
So ultimately, if the Court decides to cancel this subsidy voyage – for everybody from Consumer Cover to Insurance Island to Provider Paradise today’s Love Boat will start to feel a lot more like the SS Minnow, that stranded ship from that other TV classic, Gilligan’s Island.
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