A U.S. Supreme Court decision to block subsidies in states that did not establish their own health insurance marketplaces could destabilize the insurance markets in those states, according to a Kaiser Family Foundation report.
On March 4, the Supreme Court will hear King v. Burwell— a case challenging the PPACA subsidies.
Currently, 87 percent of people who have signed up for coverage for 2015 in states using the federal marketplace receive subsidies. Although sick people would likely figure out ways to maintain their insurance, even without subsidies, healthy people would likely drop their insurance, according to the report.
"Insurers in the affected states would immediately find themselves in a situation where premiums revenues were insufficient to cover the healthcare expenses of the remaining enrollees, who would be far sicker on average than what insurers assumed when they set their premiums for 2015," the report reads. "This would trigger a classic adverse selection 'death spiral,' where insurers would seek very large premium increases, which in turn would cause the healthier of the remaining enrollees to drop coverage."
The report notes that it is somewhat unclear how quickly insurers would increase premiums, although the earliest those premiums could change would be Jan. 1, 2016.
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