The Trump administration said late Thursday it will stop paying key subsidies designed to help low-income Americans pay for healthcare. The move was made the same day Trump signed an executive order meant to expand access to association health plans. Both decisions could do serious damage to the Affordable Care Act (ACA) and, by extension, healthcare coverage in the U.S. Here's what the Trump administration's decision means for you.
What did Trump do?
The ACA provides two types of assistance to low-income individuals and families who buy health plans on its exchange: a tax credit to help with premiums and cost-sharing reductions (CSRs) to help with copays and deductibles.
Trump's latest move nixes the CSRs. He can do this because, even though Obamacare has not been formally repealed, there's a longstanding dispute over whether Congress ever appropriated those funds. House Republicans sued the Obama adminstristion over that dispute way back in 2014 and ultimately won, but the federal judge in the case suspended her order while the administration appeals. Now that Trump is president, he can withdraw the appeal and stop the payments President Barack Obama was making under executive order.
Why did Trump cut CSR funding?
The official logline from the administration is the payments are unlawful. And Trump has long derided their existence as a bailout for insurance companies — a sentiment he echoed on Twitter as the news was breaking.
The Democrats ObamaCare is imploding. Massive subsidy payments to their pet insurance companies has stopped. Dems should call me to fix!— Donald J. Trump (@realDonaldTrump) October 13, 2017
But Democratic leaders were quick to call sabotage in the wake of Republican lawmakers' repeated failure to repeal and replace the law. And Trump, who hasn't exactly kept his disdain for his predecessor's signature legislation a secret, has taken many steps to undermine the ACA since taking office. That includes shortening the 2018 federal open enrollment period and slashing the budget for ACA advertising from $100 million to $10 million.
What will happen if CSR payments aren't made?
Trump is saying his combined actions will lead to lower costs and more options in the healthcare market, but, in fact, there's every reason to believe the opposite is true. Cutting cost-sharing subsidies, specifically, is likely to force insurance companies to raise premiums or exit the healthcare exchanges entirely.
How severely this will impact 2018 open enrollment is a bit of a mystery. Trump has been threatening to cancel CSRs for months now and that threat, coupled with Republicans' efforts to undo the law, has already caused many insurers to exit the 2018 exchanges and/or hike premiums. (Case in point: California announced earlier this week that it was adding a surcharge its silver plans due to the federal government's lack of commitment to CSRs.) So there's a chance any major damage related to the current state of affairs has already been done. Having said that, ending CSR payments is grounds for an insurance company to back out of its contract to sell health plans on the exchanges for 2018, so we could see more insurers back out of the market.
What happens next?
It's unclear. Congress could move to appropriate funding to make the payments. Trump's decision to eliminate CSR payments in the wake of any ACA replacement isn't a popular one. Insurers aren't a fan, for obvious reasons, but healthcare providers have also already come out against the president's decision. (Per a statement from the American Medical Association, "our patients will ultimately pay the price.") And members of the Republican party have urged Trump to continue the payments, given it'll likely cost some of their constituents their healthcare.
It also, ironically, is likely to cost the government. An independent analysis conducted by the Congressional Budget Office (CBO) back in August found ending CSRs would raise the deficit by $194 billion over 10 years. That's because — and this is important for consumers — the federal government would wind up paying higher premium tax credits, something Trump can't do away with on his own.
But if Congress doesn't act, state Attorneys general could try to resurrect CSRs. A separate court ruling in August gave 17 of them, plus Washington D.C., the power to intervene and continue the Obama administration's appeal of the original lawsuit. (And a few have already indicated to news outlets they plan on doing so.)
In other words, there's a chance this decision will get reversed before the ACA marketplace implodes.
Can I shop for healthcare while this is all going on?
Yes, absolutely. And you should. Trump cut off CSRs, but as the CBO analysis indicates, low-income Americans are still eligible for tax credits. Going back to California as an example: Its exchange has said, despite its surcharge, nearly four out of five consumers will see their premiums stay the same or decrease, given federal premium assistance.
Plus, as we've said before, if you don't buy health insurance, you won't have health insurance. And that's a pretty big risk to take, given the cost of healthcare in this country, the fact that injury and illness can happen to anyone and the federal penalty currently still associated with going without. We've got more resources that can help you get ready for open enrollment, which runs from Nov. 1 to Dec. 15, over in our Healthgenius section.