President Trump Ends Obamacare Subsidies, Here’s What It Means

WASHINGTON — President Trump finally made good on his promise to pull funding from a key set of Obamacare subsidies.

The administration announced late Thursday night that it would immediately stop supporting the cost-sharing subsidies that reimburse insurers for reducing the deductibles and co-pays of lower-income Obamacare enrollees. Trump has been paying the subsidies on a month-to-month basis, unnerving many insurers.

What does this mean for the nearly 6 million people who receive these subsidies? And what about the more than 10 million Americans enrolled in Obamacare?

The short answer: Insurers must continue providing these cost-sharing discounts — even though they won’t be paid for them. That’s because the subsidies are required by the Affordable Care Act.

However, many carriers already anticipated Trump would eliminate the funding and are hiking premiums substantially for 2018. Enrollees who qualify for premium subsidies — which are separate and unaffected — won’t have to pay much more, though they may need to switch plans to keep their rates steady. But middle-class Americans who earn too much to get premium subsidies could get walloped by higher rates.

For a more detailed answer, read on.

Related: Trump will end health care cost-sharing subsidies

Only a few months ago, insurers warned that discontinuing the funding for cost-sharing subsidies could bring down Obamacare. They, along with governors, health care providers and lawmakers on both sides of the aisle, pressed Trump to continue making the payments to stabilize the individual market in the near term.

Now that the funding is terminated, insurers’ reaction will vary, experts said. Many will continue offering coverage next year. Others, who didn’t bake in the loss of funding, may try to raise rates or pull out. And plenty of lawsuits will likely be filed.

“It introduces a lot of chaos, but this doesn’t threaten its future,” Larry Levitt, senior vice president at the Kaiser Family Foundation, said of the Affordable Care Act. “Those insurers that have built in [the end of the funding] are totally fine. They really are.”

Insurers that assumed the cost-sharing subsidy payments would be discontinued requested an additional 2% to 23%, according to a Kaiser Family Foundation analysis published in August.

Related: Trump begins Obamacare dismantling with executive order

Insurers finalized their premiums and signed contracts last month.

Carriers are levying the rate hikes in different ways. Some are spreading it out across all their plans, but others are limiting it to just silver-tier polices — the plans eligible consumers must purchase to receive the cost-sharing subsidies. In California, for instance, insurers will levy a surcharge of up to 27% on silver-level plans.

Other carriers, however, did not build in a buffer in case Trump ended the payments. These insurers are in more of a pickle. Some may try to raise rates now, though this would have to be approved by regulators. Others may try to exercise a clause in their contracts that allows them to drop out if the subsidy funding disappears.

As for Obamacare enrollees, the impact also varies. More than eight in 10 are shielded from rate increases because they qualify for premium subsidies, which are not affected by Trump’s move. Premium subsidies are advanced refundable tax credits.

Those who can’t get premium subsidies could see substantial increases for 2018, which would come on top of big hikes levied for 2017. This would be particularly true if they select an insurer who raised rates across all their plans.

But unsubsidized consumers in some states could find a better deal if they shop for a bronze or gold plan offered by an insurer that loaded the rate increases into the silver policies. In Idaho, for instance, silver plan premiums will jump an average of 44%, but bronze plans are only going up 8% and gold plans 9%, on average.

Trump’s decision, however, may not be the last word on the funding of the cost-sharing subsidies.

“So what happens now? Lawsuits, lawsuits, and more lawsuits,” Nicholas Bagley, an assistant professor of law at the University of Michigan, wrote in a blog post Thursday night.

Insurers and state officials could sue the Trump administration for ending the payments. Already, New York Attorney General Eric Schneiderman, who is part of a coalition defending the subsidies, swiftly announced that the group would be taking action against Trump.

The cost-sharing subsidies have been at the center of a legal battle that dates back to 2014, when the House of Representatives filed a lawsuit against then-Health Secretary Sylvia Burwell. GOP lawmakers argued the payments were illegal because Congress never appropriated the money. A district court judge last year ruled in favor of the House, but stayed her decision. The Obama administration filed an appeal, which continued under Trump.

Related: What’s in Trump’s health care executive order?

Ending the cost-sharing subsidy payments was only one of two moves Trump made Thursday to dismantle Obamacare in the wake of Congress’ failure to repeal the law. The other was an executive order directing the Labor Department to study how to make it easier for small businesses, and possibly individuals, to join together and buy health insurance through nationwide association health plans. The department could give small employers more flexibility to offer group coverage across state lines, providing them with a broader range of policies at lower rates.

The aim of the order is to give Americans more access to lower-cost plans, but critics warn they may provide skimpier benefits. This is a greater threat to Obamacare’s long-term health since it could siphon off young and healthy consumers from the Obamacare exchanges, leaving mainly older and sicker workers behind, Levitt said.

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29 comments

  • look in the mirror

    Funny how Mr. Woehrle et all, never express any outrage with government subsidies to the Koch Bros, Exxon, Monsanto who pay ZERO federal taxes (in fact Exxon received a tax REBATE last year) while utilizing vast amounts of public infrastructure paid for by you and me. These same companies receive billions in corporate welfare. (Not to mention their CEO’s don’t pay anything substantial in personal taxes either). Furthermore, we give “subsidies” to the oil companies in the trillions, as well as sacrifice American lives, to protect their interests in the Middle East. You never complain about subsidies to Defense Contractors (Boeing, Lockheed, McDonnell et al) who are paid billions in over-payments for weapon systems that do not function, which the military never wanted and cost fortunes to maintain in hangars. Sad, very sad that you have chosen to ignore this and get your panties in bunches over a relatively modest program that actually helps the people who work and pay for these trump-sanctioned abuses by the 1%.

  • trucker

    Finally Trump has given up on working with congress. They lied about repeal and replace because they thought Hillary would win. He should force all of the federal government in DC to get healthcare from the VA and ban private schools for all the DC swamp creatures and swamp lawyers.

  • Givemeabreak

    “I don’t think he even tries anymore. I think he just signs executive actions,” Trump said at a campaign event in December 2015 before criticizing what he deemed Obama’s failure to adhere to the proper checks and balances. “That’s the way the system is supposed to work. And then all of a sudden, I hear he tried, he can’t do it, and then, boom, and then another one, boom.”

    “Obama goes around signing executive orders,” Trump said in February 2016. “He can’t even get along with the Democrats. He goes around signing all these executive orders. It’s a basic disaster. You can’t do it.”

    Just the opposite side of the same coin.

  • Glorious

    Just remember that we have not balanced a federal budget in a long time and out National Debt is over $20 Trillion (which does not include the trillions in state debt and unfunded pensions). At some point this pathetic financial condition will hurt every one of us. We can’t afford more entitlement nonsense.

  • Sam I Am Green Eggs And Ham

    It will be tough at first till things get sorted out…My Geisinger bronze plan was $869.00 a month feds paid $534, I paid $335 a month….why should the feds subsidize my healthcare?????? why did Geisinger jack up the price of a bronze plan? why is Giesinger making me pay for all those women and child issues? My kids are grown and gone, and if my wife gets knocked up, you all better get to a church fast cause it will be a miracle..

    • Tom D

      Your rates are not going up because you are paying for women and children; your rates are going up because you are paying for people who are treated without insurance. That’s the point of Obamacare.

  • Jeff Woehrle

    Amazing how many poorly educated liberals have no idea where the money for government subsidies comes from.

    Taxpayer money is not magic money, and the makers in America are tired of picking up the tab for the takers.

  • Tom D

    Trump’s Healthcare Plan – Step 1. Eliminate subsidies to insurance companies (who hate Trump) so companies will have to substantially increase rates. Step 2. After everyone’s rates go through the roof and a good number of insurance companies fold, have Sarah Huckabee Sanders blame Obama during a press briefing. Step 3. Enjoy, enjoy, enjoy the fact that all supporters believe Sanders and hate Obama even more. Step 4. Play golf on the taxpayer’s dime.

      • Tom D

        Off the top of my head: 1) Make coverage prices transparent so as to spur real competition—if it’s a “marketplace,” let it be a marketplace. 2) Allow for “creative” plans (Yes, Ted Cruz is right about this). 3) Have Free Choice Vouchers for employees who can’t afford their company’s insurance plans (this was proposed by someone years ago and I thought it was a great idea…yes, “great”). 4) Remove tax breaks for companies offering insurance and just make them do it. 5) Set better limits on deductibles and co-pays. That’s all that comes to mind now, but I’m sure there are way more ideas out there.

    • Robert

      Meanwhile insurance companies are freed up (Thanks to Donald) to sell across state lines custom policies that better reflect customers needs are flooding the market with an affordable product. Unfortunately that means 70 year old ladies will be forced to pay for their own birth control (about time!), and 16 year olds will need their parents permission for theirs. Again!

  • Dave

    If it were up to me I would adopt the Canadian System and make it so if you didn’t vote you lose you’re health insurance.. Maybe then all those lazy people who always say it doesn’t matter who you vote for will get the picture.

    • No you don't have any sense

      Remember trump told his groupies in Iowa he would never hire any of you for a position in his cabinet because he likes smart people. He also said he loves the poorly educated. You played right into his hands. Bwaahaahaahaa!

  • Givemeabreak

    Until someone does something about the rising costs of healthcare and prescriptions it’s still going to be expensive and only the wealthy will be healthy. The law suits and these judges setting these precedents for these frivolous lawsuits are another part of the problem. Then on top of these issues Congress is in bed with big pharma and the medical industry. Our system is broken.

    • Givemeabreak

      What you are doing is always picking C on the multiple choice test.
      Sometimes it is C but not all the time. You need to open your mind otherwise they have you right where they want you.

  • Dave

    It means all you Trumtards will be paying more for you’re Health Care..Especially if you make 15.00 an hr or have a medical issue and are over 50. Your Deductible will also go up ,but that’s OK you can get a crappy plan and live on the edge.. Now what has he done for you besides messing things up.Oh yeah, the Illegals.. They are still here.. Nothing but a bunch of Old fools taken by an Old fool.