Ending Healthcare Subsidies Would Push Premiums Up 20%
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Premiums for middle-priced plans under the Affordable Care Act would rise 20 percent by next year if President Donald Trump ends federal subsidies for the program, a newly released report by the Congressional Budget Office says.
Trump has been threatening to yank the subsidy, an estimated $7 billion annually, which he has criticized as a bailout of insurers and not legally appropriated. The subsidy is also opposed by some Republican members of Congress.
But the subsidy, technically known as a cost-sharing reduction (CSR), helps insurers lower out-of–pocket costs for deductibles and co-pays for low-income people.
Healthcare insurers have been warning for months that eliminating the CSR would lead to steep premium hikes. Several insurers have already said that without those payments, their rates will see double-digit increases by next year. The loss of the subsidy would also be likely to spur more insurers to leave the ACA marketplace exchanges.
Far from saving the federal government money, ending the CSRs would result in higher costs, according to the report by the CBO, which was written with the Joint Committee on Taxation.
By ending the payments the federal government would be required to pay larger tax credits to consumers to help offset the premium costs. All told, those additional payments would help balloon the federal deficit by $194 billion through 2026.
The CBO report also estimated that about 5 percent of people would live in parts of the country with no insurers in the marketplace in 2018 if the subsidies ended.
As worrisome as these projections appear, the CBO’s assumption may underestimate the full impact of eliminating the subsidies, says Timothy Jost, a healthcare policy expert and emeritus professor at the Washington and Lee University School of Law.
“The CBO report assumes a best-case scenario, in which the decision to end CSRs is made in time to allow insurers to adjust their rates, and that everyone acts rationally,” Jost says. “Those are heroic assumptions.”
Chris Sloan, a senior manager at Avalere Health, agrees. “Many insurers have been very clear that they need subsidies and will pull out if they don’t have them,” he says.
Maintaining the subsidies will become an urgent matter in September, when insurers have to sign contracts with the ACA exchanges. The projected deficit may spur bipartisan efforts by Congress to resolve the issue when it returns in September.
“If anything gets some members of Congress to act, it may be the rising deficit,” Sloan says.
Still, given the timetable, “the House and Senate will have to run fast and hard,” Jost says. Once again, the voices of consumers are likely to play an important role in what happens next.
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