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Insurer subsidy cut seen as costly

Premiums’ rise 20%, study finds by Compiled by Democrat-Gazette staff from wire reports | August 16, 2017 at 4:30 a.m.

WASHINGTON -- Premiums for the most popular health insurance plans would shoot up 20 percent next year and federal budget deficits would increase by $194 billion in the coming decade if President Donald Trump carries out his threat to end certain subsidies paid to insurance companies for the benefit of low-income people, the Congressional Budget Office said Tuesday.

The subsidies reimburse insurers for reducing deductibles, co-payments and other out-of-pocket costs that low-income people pay when they visit doctors, fill prescriptions or receive care in hospitals.

Even before efforts to repeal the Patient Protection and Affordable Care Act collapsed in the Senate last month, Trump began threatening to stop paying the subsidies, known as cost-sharing reductions. He said the health care law would "implode" and Democrats would have no choice but to negotiate a replacement plan. Trump described his strategy as, "Let Obamacare implode, then deal."

Those threats continue, even though each month the Trump administration has paid the subsidies. Nearly 3 in 5 customers qualify for the help, an estimated 6 million people or more.

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The nonpartisan budget office has now quantified the cost of Trump's threats, and Democrats cited the budget office's report as evidence that Congress and the administration must keep the money flowing.

"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," said Senate Minority Leader Charles Schumer, D-N.Y. "He's the president and the ball is in his court -- American families await his action."

If Trump stops paying the subsidies, the budget office said, insurers will increase premiums for midlevel "silver plans" and the government will incur additional costs because, under a separate program, it provides financial assistance to low-income people to help them pay those premiums.

"Ending the payments to insurers would introduce more chaos into an unsettled market, and perversely end up costing the federal government more in the end," said Larry Levitt of the Kaiser Family Foundation, a nonpartisan group that found similar results.

Insurers in some states would withdraw from the market because of "substantial uncertainty" about the effects of the cutoff, the budget office said. About 5 percent of the nation's population would have no insurers in the individual insurance market next year without the subsidies, it said. By contrast, if the subsidies are paid, fewer than one-half of 1 percent of people would be in such areas, the report said. Rural communities are at greater risk.

The federal government helps pay premiums for low-income people by providing them with tax credits, meaning that many beneficiaries of the Affordable Care Act would simply get their subsidies in a different way -- directly from the government.

"Gross premiums for silver plans offered through the marketplaces would be 20 percent higher in 2018 and 25 percent higher by 2020 -- boosting the amount of premium tax credits according to the statutory formula" in the Affordable Care Act, the budget office said.

The budget office does not foresee much change in the number of people who are uninsured if the cost-sharing subsidies are halted.

"The number of people uninsured would be slightly higher in 2018 but slightly lower starting in 2020," it said.

The White House immediately dismissed the report, saying that the president is still weighing options. Insurance industry groups have said they have seen no sign that payments due at the end of August will be halted.

"Regardless of what this flawed report says, Obamacare will continue to fail with or without a federal bailout," White House spokesman Ninio Fetalvo said in a statement. "Premiums are accelerating, enrollment is declining, and millions are seeing their options dwindling. This disastrous law has devastated the middle class and must be repealed and replaced."

The dispute over the subsidy payments dates back to 2014, when House Republicans filed a lawsuit asserting that President Barack Obama's administration was paying the subsidies illegally because Congress had never appropriated money for them. Last year, a federal judge agreed. The judge ordered a halt to the payments but suspended the order to allow the government to appeal. The case is pending before the U.S. Court of Appeals for the District of Columbia Circuit.

The Trump administration has been providing funds for cost-sharing subsidies month-to-month, with no commitment to pay for the remainder of this year, much less for 2018.

The budget office study was requested by the House Democratic leader, Nancy Pelosi of California, and the House Democratic whip, Steny Hoyer of Maryland.

"If he follows through with his threats," Pelosi said Tuesday, "President Trump will be single-handedly responsible for raising premiums across America by 25 percent, exploding the deficit by nearly $200 billion and creating more bare counties" without insurers.

Trump and some Republicans in Congress call the payments a bailout for insurance companies. But under the Affordable Care Act, insurers are required to provide the discounts to low-income people.

Ending the cost-sharing subsidies would confound the expectations on which the current marketplace is based. People with incomes from 200 percent to 400 percent of the poverty level -- roughly $23,750 to $47,500 a year for an individual -- could get larger tax credits and could use them to buy more robust plans covering a larger share of their medical expenses, the budget office said.

Depending on factors such as their income and age, some subsidized customers would be able to take their higher-premium tax credits and buy a generous "gold" level plan for about the same money, or a skimpy "bronze" plan for much less or nothing.

"As a result," the budget office said, "more people would purchase plans in the marketplaces than would have otherwise, and fewer people would purchase employment-based health insurance -- reducing the number of uninsured people, on net, in most years."

About 6 million people are receiving the cost-sharing subsidies, according to the Department of Health and Human Services. Terminating those subsidies would save the government $8 billion next year and a total of $118 billion through 2026, the budget office said. But those savings would be swamped by the increased cost of premium tax credits, it said.

Doctors, hospitals, insurers, consumer groups and the U.S. Chamber of Commerce have urged Trump to continue paying the cost-sharing subsidies. Leading Republican lawmakers, too, have called for continuing the payments, at least temporarily, to ensure market stability.

Senate Health, Education, Labor and Pensions Committee Chairman Lamar Alexander, R-Tenn., is working on such legislation. He and the top Democrat on the committee, Sen. Patty Murray of Washington, plan bipartisan hearings next month.

"Without payment of these cost-sharing reductions, Americans will be hurt," Alexander said this month.

Information for this article was contributed by Robert Pear and Thomas Kaplan of The New York Times and by Ricardo Alonso-Zaldivar of The Associated Press.

A Section on 08/16/2017

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