Trump Agrees to Pay Key Obamacare Subsidies, Extending its Lifeline

Amanda Michelle Gomez

Amanda Michelle Gomez ThinkProgress

Everyone and their doctor has asked President Donald Trump to continue funding Obamacare cost-sharing reduction (CSR) payments. After flirting with eliminating these payments to insurance companies, he finally agreed to pay them for the month of August. A White House spokesman told multiple news sources on Wednesday that the Trump administration will make the payment.

Under current law, insurance companies need to provide CSR subsidies to enrollees who make between 100 and 250 percent of the poverty line (that’s about $12,060 to $30,150 for an individual).  CSR is one of two types of subsidies offered to low-income people who purchase plans on the Affordable Care Act (ACA) exchanges. Unlike premium tax credits that are administered through the tax code, the federal government directly reimburses insurers for providing these CSR subsidies to help cover the costs of deductibles and co-payments.

The Congressional Budget Office released a reportTuesday that said if Trump cuts CSR payments, premiums for benchmark plans would rise 20 percent the next year and about 25 percent by 2020. Additionally it would cost the federal government, namely 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 battle.

Instead of defending the subsidy payments, Trump has been reviewing month-to-month whether he’ll continue to pay insurance companies. Early 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 Wednesday, but the wavering decision-making process signals a troublesome tactic to potential partners looking to strike deals with the federal government. “How can any company in any sector trust the United States after seeing health insurers treated so shabbily?” asked health experts Craig Garthwaite and Nicholas Bagley, when Republicans in Congress were undermining the ACA. The question still rings true.

“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 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 hyperbolic 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 percent of those enrolled in the ACA exchanges benefit from this type of subsidy– that’s 5.9 million people.

Not paying insurance companies the CSR payments costs the federal government more money — and could have cost the federal government a net increase of $2.3 billion in 2018. Insurance companies would need to raise premiums to offset the lack of CSR payments. The government pays a share of some enrollees premiums by way of tax credits. According to Kaiser Family Foundation (KFF) estimates, the federal government would lose money this way:

CREDIT: Kaiser Family Foundation

Trump agreed to pay insurers on August 21, but this battle isn’t over. Trump still needs to commit to paying CSR payments in September; that payment is due September 20th. Congress will be back from August recess by this point, and legislators could approve the payments themselves. Chairman of the health committee Senator Lamar Alexander (R-TN) announced he’d start holding hearings on September 4. 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.

“At this point, Republicans take the blame for increases in premiums, 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, no insurance to purchase a plan, they’ll get a hit.”