What happens if ACA subsidies are defunded?

What happens if ACA subsidies are defunded?

The Washington Hospitality Association has developed a raft of potent Healthcare Solutions for hospitality businesses across the state.  By visiting Washington Hospitality Healthcare Solutions webpage, members can explore options for individual, small, medium, and large organizations. Our mission is to help hospitality succeed.


You may not know the case name King v. Burwell, but if you follow health care legislation closely, you know that SCOTUS made a ruling on the case back in 2015 and the outcome was pivotal. In the end, the case was decided on the notion of what four specific words meant; “established by the state.”

What was the whole point of the case?  It was to determine the legality of federal exchanges, and specifically subsidy funding. Challengers to the Affordable Care Act (PPACA) were arguing that tax credits should only go to states that set up their own exchanges. That number at the time of the hearing was sixteen.  The Obama administration interpreted IRS rules to allow subsidies nationwide. If SCOTUS ruled otherwise, simply put that will have killed exchanges in many states.

So, what would have happened if the government lost in King vs Burwell?  Researchers from a study conducted by the RAND corporation estimated that 9.6 million would lose coverage with millions more seeing a rise in premium costs. Essentially, that would equal seventy percent of exchange participants. This figure does not include those who would potentially have dropped insurance due to higher premium costs.

How did this effect hospitality organizations?  Many of the workers that have taken to the exchanges for health care insurance, would be uninsured, and looking closely at benefit packages offered directly by employers.

Another consequence of a ruling against federal subsidies for the exchanges, would have been that many of the requirements of the ACA would be destabilized and oversight would be weakened. If subsidies were discontinued in federally run exchanges, that would mean that many exchange consumers would not have been held responsible to the individual mandate. It would also have become messy because the employer mandate is directly connected to employees claiming a subsidy for premiums.  So, with no mandate requirements imposed on workers in federal exchange states, employer responsibility would be also undermined in those areas.

Sen. Susan Collins, the Maine Republican who unwaveringly rejected a series of GOP healthcare measures, has also held the current administration responsible for encouraging instability in the insurance markets. She claimed they were doing this by continuing the ambiguity over whether the subsidies – cost-sharing payments that reduce out-of-pocket healthcare costs for poorer Americans – would continue.

House Minority Leader Nancy Pelosi (D-Calif.) indicated in a letter to Republican leaders, at the end of July, that an area of important concern would be stabilizing the Obamacare individual insurance marketplaces. Funding would be aimed at stemming the exodus of current insurers.  There is certainly bipartisan desire to stabilize the markets. How that to do that together however, remains an elusive plan.

A lot hinged on the Supreme Court’s King v. Burwell ruling, with outcomes potentially having had a significant effect on your business. Now that the President is challenging the legitimacy of federal subsidies for state exchanges, the whole question that was decided by SCOTUS in June 2015, has again resurfaced. Various organizations have forecasted the effects of halting ACA insurer payments as the president has suggested. The Congressional Budget Office estimates the budget deficit would increase by $194 billion over the next decade if the president follows through. The battle over health care continues to be historic and is by no means over in America.

So, what should you do in the wake of this uncertainty? Right now, The Washington Hospitality Association has put together a team of health care experts who are closely watching legislation and the effects it will have on your operations as a hospitality organization. If you are looking for guidance in turbulent times, use Washington Hospitality as a primary source of information for all things health care. Washington Hospitality has solutions for individual, small, medium, and large hospitality organizations.


The Washington Hospitality Association has developed a raft of potent Healthcare Solutions for hospitality businesses across the state.  By visiting Washington Hospitality Healthcare Solutions webpage, members can explore options for individual, small, medium, and large organizations. Our mission is to help hospitality succeed.

by David Faro

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