Ending Obama health care subsidies would increase deficit, premiums

Georgia Reed
August 18, 2017

The Congressional Budget Office (CBO) released a new analysis Tuesday finding that premiums would rise 20% next year and the deficit would balloon by almost $200 billion over a decade if they subsidies are cut off; many insurers have already baked the payments' demise into their 2018 plan rates. While this would be offset by subsides for most consumers in the marketplaces, there is a possibility premiums for some would rise.

This aspect of the law is created to attract healthier Americans and offset the costs of treating the sickest people, thereby keeping premium costs down.

The nonpartisan number crunchers also estimated that cutting off payments that now reduce copays and deductibles for people of modest incomes would add $194 billion to federal deficits over a decade.

The higher prices could push consumers out of individual insurance markets, making the markets less attractive to insurers as well.

In July, Trump threatened to end the ACA's cost-sharing reductions that compensate insurance companies for providing low-cost plans to low-income Americans.

Halting the payments to insurers, known as cost-sharing reductions, would boost Obamacare premiums for mid-level Obamacare plans by 20 percent next year, and by about 25 percent in 2020, as insurers raise their charges to make up for the lack of payment.

"Health plans have been working hard with insurance commissioners and state leaders to ensure that Americans who buy their own coverage have options that are as affordable as possible", said Kristine Grow, spokeswoman for insurer lobbying group, America's Health Insurance Plans.

The decision to make this month's payment, due next week, signaled that the administration has decided against immediately precipitating a collapse, potentially giving Congress time to pass a bipartisan package of fixes to some of the law's problems.

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Overall, the number of uninsured people would be slightly higher in 2018 but slightly lower starting in 2020 under the scenario the CBO examined, per the report.

Ending the cost-sharing subsidies would confound the expectations on which the current marketplace is based.

"Try to wriggle out of his responsibilities as he might, the CBO report makes clear that if President Trump refuses to make these payments, he will be responsible for American families paying more for less care", the Senate Democratic leader, Chuck Schumer of NY, said.

But the administration has continued paying the subsidies month to month as it waited for Congress to overhaul the Affordable Care Act.

But it then says the agency intends to change the ACA's risk adjustment program to compensate for the loss of cost-sharing payments.

The House filed suit against the Obama administration in 2014 under the leadership of former Speaker John Boehner, claiming it was illegally reimbursing marketplace insurers for CSRs.

Senate Health Committee Chairman Lamar Alexander, Tennessee Republican, praised the administration's decision to keep the money flowing for now.

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