The federal government will make crucial Obamacare-related subsidy payments to health insurers in August despite threats by President Donald Trump to end them, a White House spokesman said last week.
The decision to make the August payments came a day after the Congressional Budget Office warned that Obamacare premiums would soar an additional 20% above projected price increases if the payments are ended in 2018, according to CNBC. Uncertainty over whether the so-called cost-sharing reimbursements (CSRs) will continue has already led some insurers to exit Obamacare markets next year, or to ask for significantly higher premiums for 2018.
After the announcement Wednesday (August 16, 2017), Sen. Lamar Alexander (R-TN) said Congress should act soon to guarantee that the CSRs will be paid to insurers through 2018. The CSRs, worth about $7 billion this year, compensate insurers for offering qualified low- and moderate-income Obamacare customers discounts in their out-of-pocket health costs, including co-payments and deductibles. Those discounts are mandated by law.
Most people who buy health coverage on HealthCare.gov and other government-run insurance marketplaces qualify for the reduced charges. Almost 6 million people qualified last year. Trump, irked about the failure of his fellow Republicans in the Senate to pass an Obamacare replacement bill, had threatened in a tweet to end CSR payments to insurers.
“If a new HealthCare Bill is not approved quickly, BAILOUTS for Insurance Companies and BAILOUTS for Members of Congress will end very soon!”said President Trump.
The President previously has tried to use the threat of ending the CSR payments as a means to force passage of a bill to replace Obamacare. But just as he has done every month since taking office, Trump on Wednesday agreed to let them continue.
The Affordable Care Act requires insurers to offer reduced out-of-pocket charges to customers of individual health plans if those people earn less than 250% of the federal poverty level, or less than $30,150 per year for a single person.
A report by the Kaiser Family Foundation (Menlo Park CA) found that for people who earn between 150% and 200% of poverty, “the average deductible is reduced to $809, a savings of $2,800” each year. The ACA also says that the federal government will compensate insurers for the money they do not collect in co-payments, coinsurance and deductibles from the qualified customers.
Next year the subsidies are projected to be worth $10 billion to insurers.
After threatening to stop the cost-sharing reduction payments, Trump finally paid insurers; at least for now. Everyone and their doctor has asked the President to continue funding Obamacare CSR payments. After flirting with eliminating these payments to insurance companies, he finally agreed to pay them for the month of August.
The Congressional Budget Office released a report last week that said if Trump cuts CSR payments, premiums for benchmark plans would rise 20% next year and about 25% by 2020. Additionally it would cost the federal government, namely we taxpayers, about $194 billion over 10 years.
Due to a lawsuit filed by the House of Representatives during the Obama administration, paying insurers directly has been a point of contention for years now. The House claimed that federal payments to insurers was unconstitutional, and the Obama administration had been forced to fight the legality of the ACA provision in court ever since. The Trump administration inherited the legal mêlée.
Instead of defending the subsidy payments, Trump has been reviewing month-to-month whether he’ll continue to pay them to insurers. Earlier in August, states gained the ability to defend CSR payments to insurance companies in court, since it’s become evident that the Trump administration isn’t committed to protecting the ACA.
Trump may have agreed to pay the subsidies last week, but the keep-them-guessing, decision-making process signals big trouble to potential partners looking to strike deals with the federal government.
“How can any company in any sector trust the US after seeing health insurers treated so shabbily?” asked health experts Craig Garthwaite and Nicholas Bagley, when Republicans in Congress were undermining the ACA.
Their question has morphed into one big red flag screaming: danger ahead!
“I think the government — Congress and administration, has treated [insurance companies] shamefully,” Timothy Jost, emeritus professor at Washington and Lee University School of Law, told Amanda Michelle Gomez at ThinkProgress. “If they treated Defense, or Medicare providers, or Medicare Advantage Plans providers the way they have treated insurers under the ACA, they would shut down.”
Trump has called CSR payments insurance “bailouts,” but his exaggerated language distorts the facts. These payments were essentially an agreement reached under the ACA. If insurance companies don’t subsidize care, they would be breaking current health law. CSR subsidies help lower-to-moderate income people purchase more affordable coverage; 57% of those enrolled in the ACA exchanges, or nearly 6 million people, benefit from this type of subsidy.
Not paying insurance companies the CSR payments costs the federal government more money, Ms. Gomez argues–and could have cost the federal government a net increase of $2.3 billion in 2018. Insurance companies would be forced to raise premiums to offset the lack of CSR payments.
It’s important to remember these companies are not tax-exempt, nonprofit entities. They will disappear quickly if they cannot turn a profit. The government pays a share of some enrollees premiums by way of tax credits. According to Kaiser Family Foundation (KFF) estimates, by continuing to pay these subsidies, the federal government would lose money.
Trump may have agreed to pay insurers on August 21, but he still needs to commit to paying CSR payments in September; that payment is due September 20th. Congress will be back from August recess by such point, and legislators could approve the payments themselves.
Chairman of the health committee Sen. Lamar Alexander (R-TN) announced he’d start holding hearings on September 4, 2017. During his announcement, he asked that Trump commit to August and September CSR payments as Congress looks to set a short-term ACA stabilization plan, according to Gomez.
“At this point, Republicans take the blame for increases in premiums, [the] uninsured, take the blame for insurers exits,” conservative group American Action Forum Tara O’Neill Hayes told ThinkProgress. “Whether they like this from policy perspective or not, the politics are real. If their constituents are facing premium increases they can’t afford or no insurance is available to purchase at any price in their market, they’ll get a hit.”
Perfect, as far as the Trump blame game goes, where someone, anyone else, even his own loyal staff members, is the reason for another promised, but failed, Trump policy program. Or another off-message, sickening rant like his statements following the Charlottesville tragedy.
When I think of the Trump administration and what’s left of its skeleton staff, I keep picturing the dive-bombed and sinking British rescue vessels in Christopher Nolan’s brilliant film, “Dunkirk.” Who wouldn’t bail in either situation?