Obamacare insurers trying to calculate next year’s premiums have hit a serious roadblock: They don’t know whether they’ll get the $9 billion in cost-sharing subsidies that the Trump administration has, thus far, refused to pay.
The money would reimburse insurers for financial assistance that the Affordable Care Act requires them to provide to low-income plan members with incomes below 250 percent of the federal poverty level. That’s about $61,000 for a family of four.
The money helps pay patients’ deductibles, coinsurance, copayments and other out-of-pocket health care costs.
Insurers and advocacy groups representing patients, health care providers and the needy have called on the Trump administration to make the payments as deadlines rapidly approach to submit premiums for individual coverage next year.
We offer three reasons why Trump will – and three reasons why he won’t – make the payments.
Trump will okay the payments because:
1) He doesn’t want to hurt his voters
While ACA subsidies helped millions of low-income Americans pay for health coverage, 19 percent of marketplace plan members nationwide – nearly 2.2 million people – get no financial assistance at all with their coverage because they earned at least four times the federal poverty level. That’s $47,550 for a single person or $97,200 for a family of four.
Some are small business owners, or self-employed or retired but not yet eligible for Medicare. Many vote overwhelmingly Republican. If Trump doesn’t fund the subsidies, insurers would likely raise premiums up to 20 percent to make up for the shortfall.
Lower-income people could count on the Obamacare tax credits to make up the difference. But the 2.2 million who get no financial assistance would have to pay the higher rates entirely out-of-pocket. Talk about getting hit with a double whammy.
2) Trump wants to keep the insurance industry happy
Let’s face it, Trump’s a pro-business guy. And his administration has embraced policies that bolster the bottom lines of individual insurers. The Department of Health and Human Services just ushered in a slew of new marketplace rules that make it easier for insurers to collect unpaid premiums and charge older people more, while tightening enrollment requirements and lowering the percentage of medical costs that insurers have to cover.
Those new regulations – and the industry-friendly GOP health care bill that passed the House of Representatives – help explains why insurers haven’t complained more loudly about Trump’s plan to not enforce the individual mandate.
The industry has, however, been screaming about payment of the cost-sharing subsidies. Insurers hate uncertainty, especially when they know Trump could resolve the matter with little fallout. Does Trump really want to make an enemy of such a powerful industry?
3) GOP lawmakers running in 2018 don’t want extra baggage
House Republicans who voted for the GOP’s American Health Care Act already have seen an uptick in anger at town halls and other events from voters worried about losing their health care. Imagine the venom they’ll face in an election year if Trump pulls the plug on subsidy funding – which would cause their premiums to spike and more insurers to pull out of the individual market. It’s going to be hard enough for Republicans campaigning against the scandal-plagued White House in 2018. Would Trump really make things harder by risking a meltdown of the individual market by not funding the subsidies?
On the other hand, maybe Trump won’t pay the cost-sharing subsidies. He has a few reasons for that decision as well. Here’s why Trump will won’t pay:
1) He thinks it gives him more leverage with Democrats in Obamacare repeal negotiations
Trump said as much back in April. “I don’t want people to get hurt,” he said in an interview with the Wall Street Journal. “What I think should happen — and will happen — is the Democrats will start calling me and negotiating.”
That didn’t happen, however. Senate Minority Leader Chuck Schumer, D-N.Y., denounced Trump’s overture. But media reports suggest the Trump administration continued to use the subsidies like a bargaining chip.
The Los Angeles Times reported that Medicaid administrator Seema Verma told health insurance officials in April that the subsidy money would only be paid after the House health care bill passed. In addition, Verma reportedly asked the insurers to endorse the legislation, which had been panned by hospitals, doctors, nurses and patient advocacy groups. Health and Human Services officials have denied that Verma dangled the payments in return for industry support for the GOP bill. But Democrats want more answers about Verma’s discussions with insurers.
As the Senate works slowly on compromise legislation to replace Obamacare, the Trump administration recently asked a federal court for an additional three months to decide on the subsidy payments.
2) Topping Obamacare would make Trump a hero to his conservative base
It’s no secret that many conservatives are upset with Republicans’ failure to enact a clean repeal of the Affordable Care Act. They don’t understand why Republicans would rather throw darts at the health law rather than drive a stake through its heart.
On Friday, two conservative groups called on HHS Secretary Tom Price to use his regulatory authority to further dismantle the ACA since the Senate is moving so slowly. Congressional Republicans can blame themselves for the frustration, having raised expectations for repeal by voting to do so more than 50 times while President Barack Obama was in office.
Simply withholding the subsidies would allow Trump to do what congressional Republicans haven’t: take the air out of Obamacare without a drawn-out legislative battle. Withholding the subsidies would take Trump’s folk-hero status to a new level and provide a legacy that would stand even if he doesn’t survive the Russia investigations.
3) Trump really dislikes Obama
The Trump administration’s policy goals seem to embody one overriding theme: reverse or undo any policies the Obama administration put in place. It’s clear that Trump – the former birther-in-chief – doesn’t like Barack Obama.
And engineering the downfall of Obama’s signature legislation would be hard for Trump to resist. He can simply withhold the subsidy payments, saying, ‘Why throw good money at a system that's already failing?’ and watch the effects mount as premiums rise, people stop buying coverage and insurers flee the market.