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CBO to reveal fallout for Obamacare prices if Trump kills payments to insurers

  • The payments are to reimburse insurers for discounts in health costs offered to low- and middle-income Obamacare customers.
  • Insurers are projected to receive $10 billion in subsidies in 2018.
  • Premiums for 2018 already are higher in some cases because insurers fear the Trump administration will end the payments.
Protesters stage a 'die-in' before a town hall meeting with US Representative Tom MacArthur (R-NJ) in Willingboro, New Jersey on May 10, 2017. MacArthur wrote the amendment to the American Health Care Act that revived the failed bill, delivering a legislative victory for US President Donald Trump.
Domonick Reuter | AFP | Getty Images
Protesters stage a 'die-in' before a town hall meeting with US Representative Tom MacArthur (R-NJ) in Willingboro, New Jersey on May 10, 2017. MacArthur wrote the amendment to the American Health Care Act that revived the failed bill, delivering a legislative victory for US President Donald Trump.

The Congressional Budget Office will weigh in Tuesday on how much it will cost Obamacare customers, insurers and taxpayers if President Donald Trump follows through on his threat to kill key federal subsidies to the program.

Trump has repeatedly threatened to end the billions of dollars in payments to insurance companies that sell individual health plans under the Affordable Care Act.

He has ratcheted up those threats on the heels of a humiliating loss in the Senate by Republican leaders to pass a bill that would repeal and replace major parts of the program.

The payments compensate insurers for discounts offered to low- and middle-income Obamacare customers on their deductibles, co-payments and other out-of-pocket health costs. More than 7 million Obamacare customers qualify for the subsidies.

The Kaiser Family Foundation found that for people who earn 150 percent to 200 percent of the federal poverty level, "the average deductible is reduced to $809, a savings of $2,800" each year by the subsidies.

Insurers have warned they will have to raise premiums sharply to make up for the loss of the so-called cost-sharing reductions payments, or CSRs, if Trump cuts them off.

That's because the insurers must keep offering the discounts, by law, even if they do not get the money promised by the federal government to subsidize those discounts.

The nonpartisan CBO, in a statement Monday, said its analysis will include the expected effects on premiums from such a decision.

The report also will look at the effects on the number of people with health insurance coverage, the stability of the insurance market, as well as the effects on the federal budget.

The subsidies are already projected to cost the federal government about $10 billion in 2018.

But killing them could actually end up costing the government even more money than the decision would save.

In April, a Kaiser analysissaid ending the cost-sharing reduction payments would lead to an extra $12.3 billion in other Obamacare costs in 2018 alone. As a result, the government would add $2.3 billion to its current budget deficit from such a decision.

And over the next decade, Kaiser found, the government would be responsible for $31 billion in extra Obamacare spending.

The extra spending is expected because the government would be responsible for covering most, and in some cases all, of the the higher premiums that Obamacare customers would be charged as a result of the demise of cost-sharing payments.

The ACA requires the government to subsidize the premiums of Obamacare customers who earn 100 percent to 400 percent of the federal poverty level. The value of the subsidies rise with the premiums.

However, unlike the premiums for the subsidies, the cost-sharing reduction payments to insurers are not explicitly guaranteed by the ACA.

That fact led the Republican-led House to sue the Obama administration for making the payments to insurers even after Congress did not appropriate money for that purpose.

A federal judge in 2016 upheld the House's challenge to the legality of the payments. But she agreed to let the reimbursements continue to flow to insurers as the Obama administration appealed her decision.

After Trump took office, he could have ordered that the appeal be dropped, and, as a result, allowed the payments to insurers to end. But neither he, nor the House, has made a push to end the appeal as it became clear that premium prices would spike dramatically if the payments ended.

Last month, a federal appeals court for Washington, D.C., said it would allow a coalition of 16 Democratic state attorneys general to intervene in the pending lawsuit that challenges the legality of the payments to insurers. The coalition wants the payments to continue.

The court's decision could keep the payments flowing to insurers, at least for while, until legal arguments are made by the coalition.

Uncertainty to date over whether Trump will guarantee the federal payments through next year has already led some insurers to seek higher prices for 2018 than they would otherwise have requested.

Big insurer Anthem said it would effectively abandon the Obamacare markets several states in 2018, partly as a result of uncertainty about the cost-sharing reimbursements.

In May, Blue Cross Blue Shield of North Carolina asked for a nearly 23 percent increase in premiums next year. But the insurer at the same time said it would have requested an increase of slightly less than 9 percent if the cost-sharing reduction reimbursements were guaranteed.

Blue Cross Blue Shield later cut its rate increase request to 14.1 percent, which is still 5.3 percentage points higher than it would have been if the cost-sharing reduction payments were guaranteed.

The Cleveland Plain Dealer reported that Ohio insurers are filing sharply higher premium requests with state regulators in case Trump ends the CSR payments.

Insurers already were asking for price hikes averaging 20 percent or more for 2018. But regulators asked for new requests that assume an end to CSR payments and other factors. For example, Molina Healthcare of Ohio wants to add a 21.4 percent average price increase on top of its existing request of a 24 percent increase.