Obamacare Participation Would Plummet Without Subsidies, Study Finds

The loss of federal tax subsidies would cause millions of Americans to drop out of the insurance market and cripple the Affordable Care Act, according to a new analysis.

The study, conducted by Rand Corp., found premium costs could jump by 43% if subsidies were eliminated, causing enrollment to plummet by 68%.

“If subsidies are eliminated entirely, our research predicts substantial disruption in the individual health insurance market,” said Christine Eibner, the study’s lead author, in a press release. “Without the subsidies, prices would jump sharply and many people simply could not afford to enroll.”

The issue matters because the Affordable Care Act remains deeply unpopular among many Americans. One way opponents are battling the law is by challenging the legality of the subsidies in court. The challengers say the law’s language only authorizes subsidies when individuals purchase their insurance from state-run marketplaces, rather than federally run markets. The matter is currently working its way through the federal courts, and could end up before the US Supreme Court.

As of today, 36 states would be affected by the ruling, because they don’t have their own state marketplaces. However, the Rand study gauges the impact of a complete elimination of the subsidy, in all 50 states and the District of Columbia.

The researchers also looked at the impacts of an elimination of the individual mandate, which requires all Americans to have health insurance or pay a penalty. Removing the mandate would cause 8.2 million Americans to become uninsured, the study found, and would cause premiums to rise by 7%.

Meanwhile, the study found young adults have an impact on the price of premiums in the marketplace. It found a drop in the number of young people buying insurance would cause a small increase in premium prices — about 0.44% per 1%-drop in young adult enrollment.

Switching from a subsidy incentive to a voucher incentive would make premium prices more sensitive to young adult enrollment numbers, Rand found. If a voucher system were used, a 1% drop in young adult enrollment would cause a 0.75% increase in premium prices.