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Trump to cut off federal subsidies to health insurers under Obamacare

Dr. Martha Perez examines Maria Lebron in a room at the Community Health of South Florida, Doris Ison Health Center. Joe Raedle/Getty Images

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The White House announced late Thursday that the administration will stop making cost-sharing reduction payments to insurers to subsidize health insurance plans they offer to low-income Americans under the Affordable Care Act.

The action came just after a set of other regulatory changes were announced relaxing the rules and required benefits for health plans under Obamacare.

President Trump’s action on the cost-sharing reduction payments could rapidly upset the insurance market — specifically the individual market, where insurers count on the subsidies to afford to offer policies to people eligible for financial assistance.

The cost-sharing reduction payments were expected to total about $9 billion for 2017, and $100 billion over the next decade.

Cost-sharing reduction payments provide taxpayer dollars to insurers, so insurers can offer health plans on the ACA exchanges to people earning from 100 percent to 250 percent of the poverty level. The subsidies lower their out-of-pocket co-pays and deductibles.

“Essentially, this is going back to the pre-ACA world, where you don’t have to cover things like prescription drugs. The requirements in terms of pre-existing condition exclusions are now up in the air,” said Benjamin Sommers, an associate professor of health policy and economics at Harvard University.

In other words, Sommers said, this is a good thing if you’re young and healthy, and don’t want comprehensive health insurance. But for older adults, people with chronic conditions, and those who want coverage for prescription drugs and mental health — this is not a good thing. 

“This will undermine a lot of the gains over the past four years,” he added.

Trump administration health officials said that based on an opinion from the Justice Department, the payments are improper and will end immediately.

When people start signing up for ACA insurance in a few weeks, they may see premiums and co-pays listed for 2018 coverage that are based on the cost-sharing reduction payments continuing to be paid by the Trump administration.

However, if insurers aren’t getting paid anymore, they could face significantly higher costs, and financial losses.

Halting the payments could cause insurers to raise some customers’ premiums on the exchanges next year to make up the lost money, or to withdraw from the individual market and Obamacare exchanges altogether.

According to Consumer Reports, nearly 6 million Americans — more than half of those who buy their health insurance through the Obamacare exchanges — have been benefiting from the cost-sharing reduction payments subsidies until now, through significantly lower co-pays and deductibles. A separate subsidy that funds tax breaks for low- and middle-income people to make their Obamacare insurance premiums more affordable is not affected by the Trump administration decision on cost-sharing reduction payments to insurers. 

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