The Freakout From An Obamacare Ruling Could Be Unlike Anything We've Seen

03/20/2015 07:44 am ET | Updated Mar 20, 2015

WASHINGTON -- Experts have a pretty good sense of what will happen if the Supreme Court rules in favor of the plaintiffs in King v. Burwell, cutting off Obamacare’s tax credits in roughly two-thirds of the states. Without that financial assistance, most of the people now buying insurance through healthcare.gov, the online marketplace run by the federal government, wouldn’t be able to pay for their coverage anymore.

A ruling wouldn’t affect people living in states like California and Kentucky, which operate their own insurance marketplaces. But the results in the rest of the country would be dramatic and visible. More than 8 million people would end up uninsured, according to estimates by the non-partisan Urban Institute. Economic disarray would follow, as panicked insurance companies hiked premiums and pulled out of markets suddenly bereft of customers.

What the experts can’t say is how people would feel about such a shock, because it’s hard to think of a time when government took away benefits from so many people, across such a large swath of the country, within such a short time. There just isn’t a great historical analogue for predicting how people would react -- or, for that matter, how that reaction would affect politics. Even veteran strategists seem stumped.

But one recent episode may offer some clues. It comes, ironically enough, from Obamacare’s own history.

In the fall of 2013, insurance companies canceled coverage for millions of Americans, either because the old policies weren’t up to Obamacare’s standards or because the insurers decided the old policies were no longer profitable to sell. The cancellations surprised most Americans, not least because President Barack Obama had famously promised that people who liked their old insurance plans could keep them. You couldn’t turn on the television without hearing from somebody dismayed, angry, or scared about what was happening. Looking back at 2013, it’s hard to remember a time when, for better or worse, a change in domestic policy created so much turmoil.

The differences between 2013 and a potential Supreme Court decision are large enough to make direct comparisons impossible. That’s particularly true when it comes to figuring out who an angry public would hold responsible this time around. The court’s conservative majority, for issuing such a decision? Republicans, for backing this case and trying to take away people’s insurance? Obama and the Democrats, for creating the law in the first place?

But if the 2013 controversy doesn’t indicate much about the shape of a reaction to a Supreme Court reaction, it may say something about the scale -- and why the intensity of reaction this time, whatever its direction, is likely to be even larger than it was last time.

One reason for this is the raw numbers involved. Nobody knows exactly how many policies insurance companies actually canceled in the fall of 2013. At one point, The Associated Press compiled an estimate, based on reports from state insurance officials, suggesting that the number was close to 5 million. But subsequent estimates suggested that number was far too high. One of the most thorough examinations available came from Lisa Clemans-Cope and Nathaniel Anderson at the Urban Institute. They concluded that cancellations probably numbered around 2.6 million. Jon Gabel, from the University of Chicago, came up with an even smaller number: 1.9 million.

You shouldn't take either figure as gospel. In both cases, the scholars in effect juxtaposed survey data with estimates of the number of people with “non-group” insurance, which itself has been difficult for experts to measure. But even if the Urban Institute and Gabel estimates are low by a million or two -- which would be a huge error -- it’d still be far less than the 7.7 million who would instantly lose insurance from an adverse ruling in King v. Burwell -- to say nothing of the millions more who would have to pay higher premiums in the future because state insurance markets would be in such trouble.

And the people who got cancellation notices last time didn’t necessarily end up in worse shape. On the contrary, a large percentage of the people with canceled policies became eligible either for Medicaid, which is basically free, or subsidized insurance, which cost much less than the old, unsubsidized policies. Exactly how many has been difficult to pin down, because the data on what people were paying before the change -- and what they were getting for that money -- is so spotty. But some of the best information available comes from the Kaiser Family Foundation, which surveyed people buying coverage in the new markets. Forty-six percent of respondents who’d lost non-compliant plans said they had found new policies that cost less, while another 15 percent said they found new policies that cost roughly the same. Just 39 percent -- a significant fraction, but still a minority -- ended up paying more.

By contrast, if the Supreme Court yanks tax credits in the states using healthcare.gov, then 100 percent of the people who were receiving that assistance will see their premiums go up. The increases will not be small. Calculations from the Kaiser Foundation suggest that, for people who now rely on tax credits, premiums would rise on average by $268 each month -- enough, again, to make the cost of maintaining coverage prohibitive.

And that, ultimately, is the biggest difference between the 2013 cancellations and what would happen, this summer, if the court strikes down subsidies in the healthcare.gov states. Two years ago, if you were one of those people who lost your coverage, you were still able to find an alternative. And thanks to the law’s regulations -- yes, the same ones that sometimes made coverage more expensive -- you at least knew that your new policy was comprehensive. It had to include all essential benefits, including mental health and prescription coverage. And it had to limit your out-of-pocket expenses. This summer, if the Supreme Court takes away your coverage, you'll end up with ... nothing. Just like that, you’ll go from the ranks of the safely insured to the ranks of the uninsured -- a far more drastic, and hazardous, transition than people experienced because of plan cancellations in 2013.

To be clear, forcing millions of people to change insurance policies back then was plenty disruptive, far more so than the law’s advocates realized it would be. But that disruption was part of a transition to a new environment for health insurance -- one in which more people had coverage and those with coverage were more secure. By contrast, the (considerably) greater disruptions from a Supreme Court decision eliminating tax credits would signal a return to the pre-Obamacare status quo -- an environment in which many fewer people had insurance and those with coverage couldn’t be as confident it would pay for their needs.

Such a transformation could be a nightmare for whichever politicians the public holds responsible -- to say nothing of the people who suddenly find themselves with no way to pay their medical bills.

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