(CN) – With the legal battle over the Affordable Care Act now before a federal appeals court, a new study says repealing the law would deepen the divide between the have and have-nots: Wealthy Americans would receive billions in tax cuts, while poor people would lose their health insurance subsidies.
An impending ruling from a three-judge panel of the New Orleans-based Fifth Circuit will affect the millions of people who have signed up for health insurance through the ACA, also known as Obamacare, the majority of whom receive subsidies from the federal government.
The Center on Budget and Policy Priorities, or CBPP, claims in a report released Monday that if the lawsuit succeeds, 20 million people would lose their health insurance and health insurance costs would increase for millions more.
The purportedly nonpartisan think tank, along with several medical organizations, has filed an amicus brief supporting keeping the ACA on the books.
The ACA is funded by excise taxes on health insurance companies, prescription drug makers and importers, medical device sales and indoor tanning companies. It’s also paid for with an income tax hike on people who make more than $200,000 per year and investment income.
According to the report, if the ACA is struck down, taxes for the 1,400 wealthiest U.S. households would drop by $3.8 billion; by $34 billion on taxes on households with incomes of more than $1 million; and by $45 billion for married couples with incomes over $250,000, or on individuals who make more than $200,000 a year.
The CBPP says an ACA repeal would do away with federal subsidies for people to buy health insurance. The subsidies were around $600 per year for poor and middle-income families in 2014, according to the Congressional Budget Office.
“In effect, the administration and the state attorneys general are seeking a massive transfer of income from low- and moderate-income Americans to people on the top rungs of the income ladder,” the report states.
With no ACA, senior citizens would also see a spike in their prescription drug costs, while drugmakers would pay $2.8 billion less in taxes per year, according to the report.
The Heritage Foundation, a Washington D.C. conservative think tank, is against the ACA, which it claims caused premiums for individual coverage to more than double from 2013 to 2017.
Heritage Foundation research fellow Jamie Hall said the CBPP’s report makes incorrect assumptions.
“CBPP incorrectly refers to the potential end of the Obamacare tax as a ‘transfer’ in the opposite direction. But it’s unlikely that Congress and the states would allow the health care system to revert back to the pre-Obamacare status quo if this health law is eventually deemed unconstitutional by the Supreme Court,” he said.
Hall said the litigation shows that the ACA is structurally flawed and needs to be changed by Congress. Republicans who support its repeal have promised to keep its provision requiring health insurers to provide coverage for people with pre-existing conditions.
After Republicans repeatedly tried and failed to repeal the ACA in Congress, they were given a back door in the Tax Cuts and Jobs Act that President Donald Trump signed in December 2017.
That law repealed the tax penalty in the ACA for people who don’t have health insurance, which the law’s architects said was needed to ensure health insurance pools don’t have a disproportionate number of sick people compared to healthy people, which would force insurers to jack up premiums.
The U.S. Supreme Court upheld the ACA, President Barack Obama’s signature legislative victory, with the 5-4 majority finding in June 2012 the ACA is a constitutional exercise of federal power as long as the tax penalty exists.
A Texas-led group of 20 Republican-led states seized on that reasoning and convinced U.S. District Judge Reed O’Connor, a George W. Bush appointee, to declare the ACA unconstitutional in December 2018 because the individual mandate has been stripped out.
Texas claims the ACA lacks severability—if Congress makes one part of the law unconstitutional, the whole thing must be scrapped.
After Trump took office, the federal government joined Texas’ quest to undo the law.
They are now battling against California and 15 other Democrat-led states, which intervened in the case in April 2018 and appealed O’Connor’s ruling, which he stayed, to the Fifth Circuit.
After hearing oral arguments in July, a three-judge panel will hand down its ruling soon. However the panel rules, they are unlikely to have the last word. An appeal to the U.S. Supreme Court or to the full Fifth Circuit is expected.