Supreme Court Upholds Obamacare Subsidies for 25,000 West Virginians

The Supreme Court upheld a key provision of the Affordable Care Act today, protecting subsidies that make health insurance affordable for millions of Americans, and tens of thousands of West Virginians.

In a 6-3 ruling, the Court found that premium subsidies should be available both in states that have set up their own health insurance exchanges, and in states that use the federal exchange, like West Virginia.

The plaintiffs in King vs Burwell case contended that the under the law, premium subsidies should only be available in states with their own exchanges, not to those enrolled through the federal exchange. This argument was supported by a number of conservative politicians, including West Virginia’s Attorney General Patrick Morrisey.

However, the Court rejected that argument, making subsidies available in all states, marking the second time the Supreme Court has upheld a key Affordable Care Act Provision.

West Virginia is one of 36 states using the federal exchange rather than setting up its own exchange. Had the Supreme Court’s ruling gone the other way, West Virginians in the federal exchange would have lost their premium subsidies, in some cases tripling the cost of health insurance.

The are approximately 33,000 people enrolled in health insurance plans through the exchange in West Virginia, with about 25,000 qualified for premium subsidies. In 2014, those with subsidized exchange plans in West Virginia saw their monthly premiums reduced from $415 to just $113, meaning that 78% of premium costs are covered by subsidies. At that rate, in 2016 the subsidies could save low and moderate income West Virginians over $185 million.

Since the enactment of the Affordable Care Act, West Virginia’s uninsured rate has plummeted from 17% to 6.6%, almost entirely due to the law. With the Supreme Court’s ruling today, that progress in insuring West Virginia’s population has been protected and the destabilization of the individual market has been prevented, and West Virginia remains one of the biggest Affordable Care Act success stories.

Is the Coal Tax Credit a Giveaway?

Yesterday, the Senate Energy Committee passed out HB 3072, which gives West Virginia coal companies a severance tax credit of $3 per ton for coal that is sold to power plants in the state that is an excess of what was sold in 2012. As we noted in an earlier post, the tax credit could not only drain money out of the general revenue fund and local governments but it could be a giveaway to the coal companies and could do little to encourage the use of West Virginia steam coal.

The effectiveness of the credit hinges on its ability to encourage utilities to purchase additional West Virginia coal instead of cheaper Western coal or halt power plants from moving to natural gas for electricity generation. To accomplish this goal, the entire value of the credit would have to be passed along to the power plant and the marginal cost of the credit would have to be large enough to encourage the purchase of West Virginia coal.

For example, in 2011 coal power plants purchased 16.2 million tons of West Virginia coal. Using this as our base year (2012), if power plants purchased 19.2 million tons – 3 million more than in 2011 – of West Virginia coal at the spot price of $67 per ton it would total $1,286,400,000. If we apply the $3 per ton credit to the additional 3 million of tons it would reduce this amount by only $9 million or to $1,277, 400,000. This is a marginal cost difference of 0.7 percent. Meanwhile, the $9 million would reduce coal severance tax collections by more than 2 percent and ultimately reduce investments in important government services and programs. Of course, this assumes that the goal of the bill is to increase the aggregate production of West Virginia coal used in the state and not just coal used by one individual power plant. 

This bill just doesn’t add up, nor does it encourage coal production or increase jobs. While there is little doubt the coal industry faces tough times ahead, we should not be giving away free money that will reduce our important investments in the public structures that we know create jobs.

New York Times Report: WV Ranks 2nd Highest in Business Subsidies

Today, the New York Times had an in-depth front page article exposing the $80 billion state and local governments bankroll businesses each year in subsides, including low-interest loans, grants, tax credits, and other gifts through the tax code. The report finds that West Virginia spends $1.57 billion per year on business incentives, ranking the state second highest in business incentives at $857 per resident.

The article is part of a series entitled “The United States of Subsidies”  that is examining business incentives and their impact on jobs and local economies. While the next two articles won’t be published until Monday and Tuesday, the New York Times has an interactive searchable database for each state that includes state and local incentives by company and program. The page for West Virginia highlights that business sales tax exemptions make up 78 percent – or $1.23 billion – of West Virginia’s business incentives, followed by $80.7 million in corporate income tax reductions and $52.7 million in grants and loans (more on this later). 

Most notably, the article found exactly what our research (see here and here) concluded in examining business subsides in West Virginia: We have little or no idea what we are getting for the millions that our state and local governments spend each year on business subsidies.

Doug Winters, an attorney for a township in Michigan, remarked that companies (auto companies, in this case) treat local government like “their own private ATM. When they need money, they come begging, but when they don’t want oversight, they say ‘get out of the way.’”

Our state policymakers (including the legislature, county school boards, county commissions, and mayors) have the power to enact policies to properly evaluate business tax incentives and to ensure that taxpayers are getting a good return on their investment. For example, they could follow the lead of the New York Times and create a state-wide searchable database of business subsidies. With this basic information, the state and the public would at least be able to see where their tax money is going.