America is on the cusp of becoming a nation with two health care systems. This sharp division is the result of continued resistance to the Affordable Care Act (ACA), and it does greatest harm to residents where the resistance is greatest.
Two current developments are animating this division: One relates to state decisions about expanding Medicaid, and the other is the potential outcome of the Supreme Court case, King v. Burwell, which was brought by ACA opponents and was argued on March 4.
The first difference arises because 28 states accepted 100 percent federal support to extend Medicaid coverage to the poor, but 22 states have rejected it. The second difference would arise if the Supreme Court withdraws premium subsidies from millions of moderate-income residents in dozens of states where the federal government administers new health insurance marketplaces.
Because of these differences, one set of states will continue to expand health coverage, eliminate coverage exclusions for people with pre-existing conditions and ensure vibrant health insurance markets and economically viable hospital systems.
In the other set of states, large numbers of people are at risk of losing health coverage, protections for people with pre-existing conditions would be in jeopardy, private insurance markets are likely to collapse and many hospitals may close.
Health coverage: In our nation’s four most populous states — California, Florida, New York and Texas — huge differences in health coverage illustrate the wide gap among the two health care Americas.
California and New York have significantly extended health coverage to the uninsured. Both states expanded Medicaid to those with annual incomes below 138 percent of the federal poverty level ($16,104 for an individual, $27,311 for three-person families). Moderate-income people can receive premium subsidies to make marketplace health plans affordable. And since both states run their health insurance marketplaces, consumers are not at risk of losing these subsidies.
As a result, these states significantly reduced their uninsured rate. According to a recent Gallup-Healthways survey, California’s adult uninsured rate last year dropped from 21.6 percent to 16.3 percent, and New York’s dropped from 12.6 to 10.3 percent. This progress is expected to continue.
On the other hand, Florida and Texas have not expanded Medicaid. In Florida, parents in a three-person family are denied Medicaid if their annual income exceeds $6,930. In Texas, the cutoff is $3,960. And in both states, non-parental adults – singles and childless couples – can’t get Medicaid even if they are penniless.
The adult uninsured rate in Texas is the highest in the nation: 24.0 percent. Florida’s uninsured rate is fourth highest at 18.9 percent.
For Texans and Floridians, the situation may soon get much worse: If the Supreme Court decides that premium subsidies should be withdrawn from states with federally run marketplaces, the Urban Institute projects that almost 1.1 million Floridians, and more than 1.4 million Texans, would lose coverage by 2016.
People with Pre-Existing Conditions: The most popular ACA reform protects people with pre-existing conditions. Insurers can’t deny or drop coverage due to such conditions and can’t charge discriminatory premiums.
For these protections to work, however, insurance pools must remain balanced so they include younger, healthier people along with older, sicker people. Failing to retain that balance means that premiums will skyrocket.
If the Supreme Court withdraws premium subsidies from states with federally run marketplaces, huge numbers of healthier people in those states will drop insurance. A recent Rand Corporation study projects that withdrawing these subsidies would reduce health coverage by 9.6 million people and would increase premiums by 47 percent.
As a result, there would be two Americas for people with pre-existing conditions: In states that run their own marketplaces, the protections will remain robust. In the other states, imbalanced insurance pools would jeopardize protections for people with pre-existing conditions because premiums would become unaffordable.
Insurers and Hospitals: In states that lose premium subsidies, the health insurance marketplaces would deteriorate as fewer and fewer healthy people keep their coverage. If these insurance markets become unstable, many insurers would exit these states and concentrate their business in more hospitable locations.
The loss of numerous insurers in these states would lead to near-monopolistic insurance markets, and consumers would lose the benefits of health plan competition. This would inevitably lead to an out-of-control spiral in premium prices.