New Arizona law puts subsidized health insurance at risk

• A bill signed by Gov. Doug Ducey prohibits Arizona from starting its own health-insurance exchange.
• More than 154,000 Arizona residents get subsidized health insurance from the federal marketplace.
• A pending U.S. Supreme Court challenge could eliminate subsidies for federal marketplace plans.

Gov. Doug Ducey signed a bill that could jeopardize health insurance for more than 150,000 Arizonans if the U.S. Supreme Court rejects subsidized coverage in Arizona and 33 other states.

Ducey last week signed House Bill 2643, which forbids Arizona setting up its own Affordable Care Act health exchange. The bill has little immediate impact on the Arizona residents who get coverage through the federal marketplace, but it could have a big impact in a few months.

In June, the U.S. Supreme Court is expected to rule in King vs. Burwell, a case that examines whether subsidies are allowed for people who buy health insurance through the federal marketplace or should be limited to states that run their own insurance exchanges.

Arizona is one of 34 states on the federal health marketplace, healthcare.gov. If the high court strikes down subsidies through the marketplace, states could decide to establish their own marketplaces to ensure consumers continue to collect subsidies to help purchase health insurance.

But HB 2643, sponsored by Arizona Rep. Justin Olson, R-Mesa, and Rep. Vince Leach, R-Oro Valley/Marana, takes that option off the table for Arizonans. The bill bars the state from funding or implementing a state-based health exchange or federal marketplace.

Ducey told reporters this week that he signed the bill because he doesn't support the Affordable Care Act, President Obama's signature health-care legislation that had extended health-insurance coverage to more than 11 million Americans as of mid-February.

"I'm not in favor of a state exchange," Ducey said. "I've been outspoken on this issue and what my opinion is of Obamacare, and that I'm no fan of it."

Ducey said the state will have a "plan of action" in the event that the Supreme Court rejects subsidies for federal exchange states.

Arizona health-care officials said they were puzzled why the Legislature would pass a bill that could eliminate affordable options for consumers.

"I am distressed that was taken off the table before it can be discussed as a viable option," said Tara McCollum Plese, senior director of external affairs at the Arizona Alliance for Community Health Centers.

U.S. Department of Health and Human Service figures show that 205,666 Arizona residents bought a health plan via the federal marketplace as of Feb. 15. About 76 percent of those enrollees — or more than 154,000 — took tax-credit subsidies to offset the monthly cost of their health-insurance premium.

If the Supreme Court strikes down the subsidies for federal exchange states, that means more than 154,000 Arizonans would have to pay the full price for their monthly health-insurance premiums. People qualify for subsidies based on their income, so lower-income earners get more generous subsidies under the federal health-care law.

HB 2643 would not apply to more than 300,000 Arizonans who secured Medicaid coverage, which expanded eligibility under the health-care law.

Washington, D.C., consultant Avalere Health estimated that more than 150,000 Arizona residents who get subsidized health insurance would see an average increase of 122 percent in their monthly bills. These people would have the option of shopping for a less-expensive plan, but many lower-income residents who don't qualify for Medicaid would likely find coverage unaffordable, experts say.

"Arizona should be doing anything and everything we can to continue providing individuals with health insurance at affordable rates," said Diane Brown, executive director of Arizona Public Interest Research Group Education Fund. "The health-insurance marketplace has resulted in more people in Arizona receiving health coverage that has led to better health as well as a stronger economy."

If the Supreme Court rejects federal marketplace subsidies, Olson said it would deal a significant blow to Obamacare. He hopes it would usher in a new era of less-expensive health insurance plans without the federal health law's mandates.

"We can reduce the price of privately purchased health insurance that could make policies affordable without the need for government assistance," Olson said.

Jan Brewer, Ducey's predecessor and an Obamacare critic, had two major decisions to make under the Affordable Care Act.

Bucking the trend of many other GOP governors, Brewer opted to expand Medicaid coverage with funding provided by the federal health-care law and a local match paid by hospitals through a special assessment.

Brewer also chose to forgo the option of a state-based exchange, sending Arizona insurance shoppers to the federal marketplace instead.

Despite a rocky roll-out of healthcare.gov, Brewer's decision to send Arizonans to the federal marketplace was likely a wise one, McCollum Plese said, noting initial problems for state-based exchanges in Oregon and Nevada. Oregon, Nevada and New Mexico planned or started state-based exchanges but switched to healthcare.gov. It is unclear how the Supreme Court case could affect subsidies in these partnership states.

In addition to blocking a state-based exchange, HB 2643 also prevents the state from using state employees or funding to enforce, administer or cooperate with the federal health-care law.

The Arizona Department of Insurance oversees health-insurance companies that market Affordable Care Act plans in Arizona. The state also reviews health insurer's filings and rates, and takes consumer complaints.

A Department of Insurance spokesman said the agency believes that such routine, regulatory enforcement activities are exempt from the bill.