Obamacare Premiums and Budget Deficits Will Soar If Trump Ends Insurer Subsidies

Mitch McConnell

Anthem to stop selling individual plans in much of Virginia

The CBO also estimated that cutting off the payments would add $194 billion to federal deficits over a decade. "This single policy could effectively end up costing 20 percent of the entire bill of the ACA".

The Congressional Budget Office said Tuesday that ending the payments next year would cause rates to soar 20% in 2018. This, of course, would increase the out-of-pocket costs borne by consumers and potentially send the healthcare exchanges (i.e., the online marketplace) into the death spiral that all of us keep hearing about.

The nonpartisan CBO scored the policy option at the request of House Democratic leadership, releasing its results just weeks after the Senate failed to deliver on a seven-year campaign promise to repeal and replace the federal health care law.

Doctors, hospitals, insurers, consumer groups and the U.S. Chamber of Commerce have all urged Trump to continue paying the cost-sharing subsidies. Sen.

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Anthem's departure - along with Aetna and UnitedHealthcare - means only one insurer will offer individual plans in more than half of Virginia's counties and independent cities next year, according to Katha Treanor, a spokeswoman for Virginia's Bureau of Insurance. "If you can cover roughly the same number of people for about $200 billion less, why wouldn't you want to do that?" he asks. That head-scratching outcome is because a different Affordable Care Act subsidy would automatically increase as premiums jump, more than wiping out any savings. As overall premiums rise, so will the cost of those other government subsidies.

The cost-sharing reductions (CSRs) help low-to-moderate income individuals purchase health insurance.

These subsidies are calculated using the cost of coverage, which is set based on the second lowest cost silver plan on the Obamacare marketplace, and an affordability variable, which is calculated on a percentage of an individual's annual income.

But it's the federal government that would swallow the costs of the higher premiums for many Americans. Insurance companies would need to raise premiums to offset the lack of CSR payments. This counter-intuitive effect would occur because President Obama designed Obamacare such that if premiums spike beyond a certain level, which they would with Trump's decision to halt payments to insurers, then another subsidy takes the wiped-out subsidies place.

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"CBO assumes that things will work out rationally, and there will be a smooth landing", he says. They're loath to front the money unless it is part of a clear transition from Obamacare to a GOP-favored health care plan.

"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.

The announcement comes as Trump has threatened to end those subsidies for insurers if Congress doesn't pass health care legislation repealing former President Barack Obama's 2010 law.

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Chairman of the health committee Senator Lamar Alexander (R-TN) announced he'd start holding hearings on September 4. The effect Trump would be hoping for if CSRs are stopped is a death spiral in the ACA exchange marketplace.

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