I’ve written (several times) about the Achilles’ heel in the subsidies-as-incentives theory of Obamacare – the cornerstone of the Halbig argument. In short, eliminating subsidies while retaining the ban on community rating and pre-existing condition exclusions will lead to insurance death spirals on Red State individual markets. This is because without subsidies, many more Americans would be exempt from the individual mandate on affordability grounds. They could then wait until becoming sick to purchase insurance, and insurers would be legally obligated to accept them.
The Kaiser Family Foundation crunches the numbers and figures out exactly how many more Americans would be exempt from the individual mandate if Halbig were the law of the land:
With subsidies available, less than 3% of uninsured people eligible for subsidies in the 36 federal marketplace states would be exempt. However, if the Halbig case prevails and the subsidies are invalidated in federal marketplace states, we estimate that 8.1 million (or 83%) of those formerly subsidy-eligible uninsured people would end up being exempt from the individual mandate. With the subsidies unavailable and the individual mandate rendered partially ineffective, it might be difficult to attract healthy people into the individual market and premiums could rise significantly in these states. The result could be what is commonly called a “death spiral,” as healthy people exit the market and premiums rise even more.
That’s a huge number. Of course, this would only be the first wave of Halbig‘s effects. As the healthiest people drop out of insurance pools, insurance premiums would rise further, making insurance unaffordable for even more people.
The legal import of this dynamic cannot go ignored. A full reading of Halbig means that Congress threatened states with a devastated insurance market if they didn’t create health exchanges. Such behavior can’t be constitutional — so the Halbig reading of the law cannot be right.