On November 10, one week after Election Day, President Donald Trump’s solicitor general and Republican state attorneys general will go before the Supreme Court to argue that the Affordable Care Act (ACA) should be struck down in its entirety. By the time the court decides the case, California v. Texas, it could have a new, far-right member, given that President Trump and Senate Majority Leader Mitch McConnell (R-KY) are rushing to replace the late Justice Ruth Bader Ginsburg. If the refigured Supreme Court strikes down the ACA, it would have a devastating impact on ordinary Americans’ health and economic security while transferring massive amounts of money to the very wealthy.
The ACA bolsters the financial security of low- and moderate-income people
The ACA supports low- and moderate-income people by ensuring access to more reliable and more affordable health insurance than in the past. It does so through a combination of measures that ensure more widespread insurance coverage, reduce costs, raise the standards of what insurance companies need to cover, and subsidize millions of lower-income and moderate-income people.
First, the creation of the health insurance marketplaces effectively made insurance affordable for people who purchase coverage on their own, regardless of their individual characteristics. In particular, the ACA prohibits discriminatory pricing, including charging more to or even completely excluding people with preexisting conditions from coverage and charging women more for the same coverage as men. It established these more reliable and more transparent marketplaces through a combination of insurance regulations to protect consumers. These regulations, for example, prohibit health insurance companies from rating applicants and denying health insurance coverage to anybody based on gender or medical history. The ACA also lowered costs by encouraging healthy people to remain in the insurance risk pool.
In addition, the ACA made health insurance more affordable by providing direct subsidies to low- and middle-income people for private coverage that they buy on one of the marketplaces and by expanding no or low-cost public health insurance coverage for low-income households through Medicaid. Women of color disproportionately rely upon the Medicaid program as a result of systemic racism, sexism, and poverty. Medicaid expansion has meant that participants will not immediately lose coverage if they receive higher wages; such a loss would push them back into economic hardship. Additionally, women gained more financial security as the ACA required insurers to cover certain preventive services such as well-woman visits and birth control with no out-of-pocket costs, as well as basic health care services such as maternity and newborn care and mental health services.
Public provisions and subsidies not only made insurance more affordable but also greatly increased the number of people insured. In all, the ACA generated the largest expansion of health insurance coverage in 50 years and drove the uninsured rate down to an all-time low.
An ACA repeal would have salient effects on the economic security and well-being of American households.
Fewer people insured and higher premiums
A repeal of the ACA by the Supreme Court would strike down the regulations that ensure the individual market has a large pool of both healthy and sick participants. This will make insurance much less affordable or even put it completely out of reach for large segments of the population, including people with preexisting conditions. Women, in particular, will be less likely to be able to afford unexpected health care emergencies and are more likely to forgo or delay health care as a result. The other aspect of such a decision would be the disappearance of the premium subsidies and the rollback of expanded eligibility in Medicaid. This would be a clear financial hit to low- and moderate-income populations.
A first direct consequence of repeal during the COVID-19 pandemic would be that more than 20 million people would lose health coverage, with especially severe spikes in uninsured rates for African Americans and Latinx people.
Pre-COVID-19 estimates show that 135.4 million people in the United States with preexisting conditions, including nearly 68 million women, could face higher premiums, face benefit exclusions, or be denied coverage altogether if they ever needed to turn to the individual market for health coverage. These scenarios involve materially adverse economic consequences for such individuals. Another 2019 analysis concludes that 54 million people may be denied coverage because their preexisting conditions are serious. These numbers may increase because COVID-19 itself constitutes a preexisting condition, and to date, more than 6.9 million Americans are COVID-19 survivors. Given that African Americans, Latinx people, and Native Americans disproportionately comprise those with COVID-19, while also having lower wages, fewer benefits, and much less wealth to fall back on, the long-term economic implications for these communities from a loss of affordable health insurance are likely to be significant.
Higher expenses for families
9.2 million enrollees received federal subsidies this year for marketplace coverage. The premium tax credit is $492 per month, covering a large part of the average $576 monthly premium. If subsidies go away, comprehensive insurance would become unaffordable for many enrollees.
Another likely economic hit for policyholders stems from the fact that insurance companies would no longer be required to issue rebates when they overcharge them. In 2019, insurance companies returned $1.37 billion in such rebates to policyholders in the United States.
In all, according to the Urban Institute, enrollment in Medicaid and the Children’s Health Insurance Program (CHIP) would drop by 15.4 million, including roughly 3 million children who got covered when their parents signed up for coverage.
Other adverse economic consequences to policyholders would include having to pay for certain preventive care services now provided with no out-of-pocket costs under the ACA, such as diabetes screenings, well-woman visits, contraceptives, and even vaccines; paying more for prescription drugs, losing coverage for maternity and newborn care and other basic health care services; and a reinstatement of annual or lifetime caps on coverage, a practice which most harmed people with chronic illnesses, such as women with breast cancer and people living with HIV.
Other economic effects
If the Supreme Court strikes down the ACA, the negative effects on state governments and hospitals would ultimately be felt by low- and middle-income households. All state governments would be adversely affected if the court were to strike down the ACA. A pre-COVID-19 analysis shows that the states would lose $134.7 billion in federal funding for health coverage through Medicaid, CHIP, and the marketplaces. With states already experiencing unprecedented short-term economic shocks, any further hits to their budgets could force deeper cuts to vital services including health care and education. These cuts could result in the loss of many middle-class jobs and services that families rely on—which could stifle the economic recovery from the COVID-19 pandemic and further deepen the economic pain for those hardest hit by the recession.
Medical providers would also incur losses because they would have many more uninsured patients unable to pay for care. The Urban Institute has estimated that uncompensated care would increase by $50.2 billion in the absence of the ACA. Doctors and hospitals could lose a crucial source of revenue, as more people lose insurance during an economic downturn. Many hospitals, family doctors, and other medical providers are already struggling financially because of COVID-19. Without the ACA, the financial pressures would increase, and many more rural and safety net hospitals that serve low- and middle-income families could be forced to close.
Surveys point to pain for millions of people if the ACA is repealed
A judicial ACA repeal will cause tens of millions of people to lose health insurance coverage, and premiums for those who need to purchase comprehensive health insurance on their own may go up considerably. Both effects will cause people to owe more for care than is the case now. Federal Reserve data on households’ financial security illuminate the possible financial consequences of people losing their health insurance, paying more out of pocket for health care, or both.
Those without health insurance were struggling financially before the pandemic. Data show that people who do not have health insurance are financially much less secure than those with health insurance. In 2019, they had less financial help in an emergency—measured by their ability to access $400 in an emergency—and were much less likely to be able to pay all of their bills. (see Figure 1) Among those without health insurance, for example, 69.4 percent could not access $400 in an emergency, while one-third—33.5 percent—of those with health insurance could not come up with $400 if they needed it. And the share of households that could not pay all of their bills was more than twice as large among those without health insurance as it was among those with health insurance—32.3 percent compared with 14.7 percent. (see Figure 1)
This is further highlighted by the share of households that ended up with substantial medical debt after an unexpected health care emergency. Importantly, medical debt is a key predictor of personal bankruptcy. The share of households without health insurance that ended up with substantial medical debt was much higher among households without health insurance, at 59.8 percent, than it was for households with health insurance, at 38.2 percent. (see Figure 2)
The combination of households’ financial fragility and medical debt is especially pertinent to the issue of ACA repeal. In the absence of the ACA’s requirements that plans cover essential health benefits—basic services such as mental health care, maternity care, and prescription drugs—and the ACA’s prohibition on annual and lifetime coverage limits, even those who remain insured may have to spend more out of pocket than is the case now. Those who lose jobs and their employer-provided health insurance due to a medical emergency or economic downturn, such as during the coronavirus pandemic, will not be able to fall back on the ACA marketplace to secure health insurance if the law is overturned.
The data bring into sharp relief what happens if households cannot come up with the extra money that would be required if the ACA is struck down. In 2019, almost 3 in 4, or 73.4 percent of, households without health insurance and without access to $400 in an emergency ended up with medical debt after an unexpected health emergency. Still, almost 2 in 3 households with health insurance that did not have access to $400 in an emergency ended up with medical debt that year. (see Figure 2)
The risk of financial insecurity is not evenly distributed. From 2015 to 2019, Black and Hispanic households as well as households self-identifying as more than one race or ethnicity were more likely to end up with medical debt than white households. (see Table 1) Similarly, the chance of incurring medical debt was higher in rural areas than in urban areas and larger for households with lower incomes, which benefit more from the ACA, than households with higher incomes. ACA repeal would especially hurt those who are already teetering on the financial edge.
Pre-COVID-19 data show that many American families already lived on the edge of financial ruin and possible bankruptcy even with health insurance. And the pandemic has strained household budgets even further, causing millions of workers—particularly women and workers of color—to lose their jobs and likely their employer-provided health insurance. Americans need more affordable health insurance coverage, not a push over the financial cliff.
Billionaires will get large tax cuts if the ACA is struck down
Even though millions of families will experience negative effects to their health and economic well-being if the ACA is struck down, not all households will be harmed. Such action would shower large tax cuts on wealthy Americans, including the billionaires whose fortunes have grown during the pandemic.
The ACA’s dramatic expansion of health coverage was financed in large part by taxes on the highest-income Americans and on companies in the health care industry, including drug companies. The taxes enacted in the ACA, which would likely be struck down if the court were to repeal it, include:
- The Medicare net investment income tax (NIIT), a 3.8 percent tax on investment income—including capital gains, dividends, and interest—for individuals making more than $200,000 per year and couples making more than $250,000 per year.
- The 0.9 percent additional Medicare tax, which applies to earnings exceeding $200,000 ($250,000 for couples).
- The $2.8 billion annual fee on manufacturers and importers of branded prescription drugs, which is paid by those firms according to their market share.
The nonpartisan Tax Policy Center estimates that repealing the ACA’s taxes would give the richest 0.1 percent of Americans—people making more than $3.8 million annually—tax cuts averaging $198,250. Middle- and lower-income Americans would see negligible tax cuts from the repeal of the ACA taxes—and at the same time, millions would lose premium tax credits that save them thousands of dollars on health insurance. (see Table 2)
The tax cuts may even be retroactive to prior years, since the ACA lawsuit is based on the preposterous theory that the entire law became unconstitutional when the individual mandate penalty was set at zero
The tax cuts may even be retroactive to prior years, since the ACA lawsuit is based on the preposterous theory that the entire law became unconstitutional when the individual mandate penalty was set at zero in the Tax Cuts and Jobs Act, the tax overhaul that President Trump signed in 2017. If so, wealthy Americans and pharmaceutical companies would be able to file amended tax returns claiming refunds from the federal government. In fact, tax lawyers have been advising wealthy clients to file refund claims to ensure that the statute of limitations on claiming refunds for taxes paid in past years does not run out.
The repeal of the ACA taxes would further increase the divide between the haves and have-nots, which has already been driven wider by the pandemic. While millions of working Americans have lost their jobs due to the pandemic, the wealthiest have seen their fortunes grow along with the stock market. The richest 100 billionaires in the country have seen their wealth increase by $332 billion during 2020 alone, bringing their combined net worth to $2.4 trillion. Repealing the ACA would mean that if those billionaires sold their assets, they would pay lower taxes on the gain—specifically, 3.8 percent less because of the NIIT. The Center for American Progress estimates, therefore, that the richest 100 billionaires in the country would stand to receive a total tax cut of $12.6 billion on their gains accruing in 2020—a small portion of their total gains.
The recent death of Justice Ruth Bader Ginsburg has made the prospect of a Supreme Court overturn of the Affordable Care Act a distinct possibility, even though it is based on a shockingly incoherent legal theory. The Trump administration has thrown the weight of the U.S. Department of Justice behind the legal challenge to the ACA, with the Justice Department planning to argue before the Court on November 10 that the law should be struck down in its entirety. Overturning the ACA would put many protections at risk and have a devastating impact on Americans’ economic security, while providing an enormous financial windfall to the very wealthy.
A repeal of the ACA through the courts would likely strike down the regulations that ensure vibrant health insurance marketplaces with large numbers of participants, while terminating subsidies and limiting affordable public insurance through Medicaid. This will hurt low- and moderate-income Americans while showering large tax cuts on the highest-income Americans.
Seth Hanlon and Christian E. Weller are senior fellows at the Center for American Progress. Andres Vinelli is vice president for Economic Policy at the Center.