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Supreme Court health care reform case has wide-ranging implications

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It isn't just the millions of previously uninsured lower-income Americans who have a big interest in the outcome of a lawsuit before the U.S. Supreme Court challenging the legality of regulations permitting health care reform law premium subsidies for those obtaining coverage in the federal exchange.

How the court rules on the suit, in which oral arguments were heard Wednesday by the high court, also could impact group health plans offered by employers.

During the last open enrollment season, more than 8.8 million people selected plans in the federal exchange, which offers coverage in the 37 states that declined to set up their own exchanges, according to the Department of Health and Human Services.

Of those 8.8 million individuals, about 87%, or more than 7.5 million, are eligible for federal premium subsidies to purchase coverage in the federal exchange.

Those subsidies — available to those with incomes between 100% and 400% of the federal poverty level — have slashed the cost of coverage for those obtaining coverage in the federal exchange.

For example, Floridians selected plans in the federal exchange with an average monthly premium of $384, according to the U.S. Department of Health and Human Services. On average, enrollees received a monthly subsidy of $297, which brought down the premium they paid for coverage to $88 a month.

If the high court strikes down the IRS rules that permit premium subsidies in the federal exchange, many exchange enrollees no longer could afford to purchase coverage and again would become uninsured.

That could impact employer plans because there would be a surge in the amount of uncompensated care, a cost health care providers in the past have shifted to insured patients in the form of higher charges where possible, experts say.

“Employers are contributing significant taxes to support ACA, but they were expected to benefit indirectly if there were less uninsured, since uncompensated care tends to get cost-shifted to those paying the bill. If the health exchange subsidies are in jeopardy, this could result in a double whammy for employers,” said Michael Thompson, a principal with PricewaterhouseCoopers L.L.P. in New York.

“There is a lot at stake for employers in the outcome of King v. Burwell,” added Gretchen Young, senior vice president of health policy at the ERISA Industry Committee in Washington, referring to the name of the case before the Supreme Court.

The high court is expected to hand down its ruling before the end of its current term in June.