U.S. President Donald Trump spent much of the year seething as his Republican allies in Congress failed to pass legislation to repeal and replace the Affordable Care Act, as Trump had promised during his campaign. On Thursday, he took a flurry of steps that he said were meant to replace “piece by piece” what he called “a broken mess.” Democrats call his actions just the latest in a series of efforts to sabotage Obamacare, as the ACA is called. Insurers and health-care groups say Trump’s moves will lead to higher costs for consumers and could potentially destabilize the marketplaces Obamacare created to serve millions of Americans. The enrollment period for next year’s coverage begins Nov. 1.
1. What did Trump do Thursday?
His administration cut off a disputed subsidy to insurers that is used to help lower-income people with co-pays and other cost sharing. He also signed an executive order that tells federal agencies to consider a number of steps that to make it possible for healthy people to buy cheaper plans that provide skimpier coverage than the ACA allows. That could lead to higher costs for people who remain on regular Obamacare plans.
2. Why were the subsidies in dispute?
The ACA created the cost-sharing reduction subsidies, or CSRs, as a way to help people whose incomes are low, but not low enough to qualify for Medicaid, afford co-pays and other out-of-pocket costs. Insurance companies were told to foot more of a patient’s bill and wait to be repaid with CSRs. In drafting the Affordable Care Act, Congress neglected to appropriate money for the payments, but former president Barack Obama funded them anyway. Republicans in Congress sued, saying that was illegal in the absence of an appropriation. A federal judge agreed, but Obama and, until now, Trump continued to make monthly payments as the case was appealed.
3. What will the impact of the subsidy cutoff be?
That’s not clear. Any action to end the payments may face legal obstacles of its own, after seventeen states and the District of Columbia won the right in August to defend the payments in a court case. Without the subsidies, some insurers have said they’ll dramatically raise premiums or pull out of the law’s state-based markets. Other insurers have already dramatically raised premiums for the coming year in anticipation of possibly losing the payments.
4. Who would be most hurt if it goes into effect?
The individuals who will be hardest hit by the president’s decision to cut off the cost-sharing subsidies aren’t the low-income people who receive the help. Insurers are required to continue offering them lower deductibles and copays, even if the government funding ends. Instead, middle-income people who buy their own health insurance would bear the burden. About eight in 10 people in the Obamacare markets for individual coverage get assistance. They’ll face higher insurance prices for 2018, because insurers can only recoup their subsidy shortfall by raising premiums.
5. How about the executive order?
The president asked regulators to craft rules that would allow small businesses to band together to buy insurance across state lines, let insurers sell short-term plans curtailed under Obamacare, and permit workers to use funds from tax-advantaged accounts to pay for their own coverage. The result of that action and others is likely to be higher premiums and fewer people covered by Obamacare. The executive order, in particular, will give people in the law’s markets several alternative forms of coverage. They will likely be cheaper, though not as comprehensive.
6. What else has Trump done on the ACA?
His administration has sharply cut the budget for advertising and outreach efforts for the open enrollment period that begins Nov. 1. It has also shortened the signup season, from three months to 45 days, and announced that the healthcare.gov website will be shut for maintenance for 12 hours on most Sundays during it. Earlier in the year, Trump directed the Internal Revenue Service to look for ways to loosen enforcement of Obamacare’s requirement that Americans obtain health coverage or pay a fine.
7. What’s his goal?
Since taking office, Trump has been predicting that Obamacare will collapse and that Democrats would then be forced to work with him to replace it. “What would be nice is if the Democratic leaders should come over to the White House,” he told reporters Friday. “If they came over, maybe we could make a deal.” The strategy carries real risk for Trump and Republicans. An August poll by the Kaiser Family Foundation found that 78 percent of those surveyed thought the administration should try and make the law work, while only 17 percent wanted to see it pushed toward failure.
8. What do Democrats say?
Democratic leaders have said they support bipartisan negotiations involving senators Lamar Alexander, a Tennessee Republican, and Patty Murray, a Washington Democrat, on legislation to fix problems with the subsidies and other factors that have driven up premiums or reduced competition on many state exchanges. Many Democrats voiced their disappointment with the executive order and the ending of CSR payments, saying the moves by the administration would sabotage Obamacare.
9. What have those in the industry said?
Insurance trade groups, as well as hospitals’ and physicians’ associations, urged Congress to enact a law requiring the payments be made, saying that the administration’s moves would cause more uncertainty in the individual marketplace. The Congressional Budget Office said in August the cost of canceling the CSRs would cause mid-level “silver” plan premiums to rise about 20 percent next year and more than that in years to come. That would mean more government spending on direct subsidies to individuals to help them purchase coverage, which would cost the government an extra $194 billion over a decade, the CBO estimated.
The Reference Shelf
- The Congressional Budget Office report on the effect of ending the CSRs.
- A Bloomberg News article on the lawsuit over the legality of the CSR payments.
- Bloomberg QuickTakes on the performance of the ACA and the individual mandate.