President Donald Trump at any time could make good on a threat to scrap crucial Obamacare payments to insurers — a decision that could raise Obamacare customers’ costs and potentially leave tens of thousands more without any coverage options next year.
While the Obamacare repeal effort has faltered in Congress, Trump has the unilateral power to abolish the payments, worth about $7 billion this year, as he has repeatedly threatened. His warnings have escalated since the implosion of the Senate’s Obamacare repeal effort last week.
“If a new HealthCare Bill is not approved quickly, BAILOUTS for Insurance Companies and BAILOUTS for Members of Congress will end very soon!” Trump tweeted on Saturday, as he also threatened to nix a health insurance subsidy for lawmakers and their aides. On Monday, he seemingly alluded to the insurer payments again, writing: "If ObamaCare is hurting people, & it is, why shouldn’t it hurt the insurance companies & why should Congress not be paying what public pays?"
The fallout from pulling Obamacare payments to insurers would be significant. It could cause skittish insurers that have already lost billions in the Obamacare markets to bolt for the exits. At the very least, insurers would hike premiums in 2018 to cover the lost payments.
"We should call this the sabotage surcharge, because that’s literally what this is," said John Gorman, a health care consultant who works with many insurers. "The insurance industry should tattoo this on Trump’s forehead."
The subsidies, known as cost-sharing reductions, lower out-of-pocket costs, such as co-payments and deductibles, for Obamacare customers earning below 250 percent of the federal poverty level, or about $30,150 for an individual and $61,500 for a family of four. The payments help cover costs for roughly 7 million Obamacare customers this year.
Insurers are facing looming deadlines for the 2018 enrollment season with the fate of the subsidies still in limbo. They must file final rates in most states in two weeks, and they have just a month to make final decisions about where to sell coverage.
Even if the federal payments disappear, insurers would still be required to discount customers’ bills. Insurers aren’t going to eat those additional expenses, so they’ll either stop selling coverage or jack up rates as much as an estimated 20 percent. Insurers would also likely sue the Trump administration, arguing that they’re entitled to the payments.
Uncertainty about subsidy payments has been cited as a factor by some insurers, including Anthem and Blue Cross and Blue Shield of Kansas City, as a factor in their decisions to scale back their Obamacare business next year. Recent insurance exits are now threatening to leave roughly 12,000 Obamacare customers across 19 counties in Ohio, Indiana and Nevada without any insurance options for 2018.
Trump has the power to pull the Obamacare payments thanks to a long-running legal dispute over the program. House Republicans sued the Obama administration in 2014, arguing that the executive branch was funding the program illegally because Congress never appropriated the money. A federal judge sided with the House last year, but the Obama administration appealed the decision.
The Trump administration hasn’t dropped the appeal, which would cause the payments to stop flowing, but instead has sought delays from the court as the Obama repeal effort played out in Congress the past six months. But the next deadline for a decision about whether to continue fighting the case comes up in three weeks.
However, Trump could potentially decide to pull the subsidies much sooner. White House counselor Kellyanne Conway on Sunday said that there will be a decision “this week” about whether to eliminate the subsidies, which the administration has been issuing each month. The president is scheduled to meet with aides Tuesday to discuss the issue, according to two administration sources.
Trump has insisted scrapping the subsidies would force Democrats to negotiate over an Obamacare replacement plan after the law "implodes." But some aides have so far have talked him out of it, believing the public would blame Trump for damaging the insurance markets.
Congress could eliminate the uncertainty about Obamacare subsidies by appropriating money for the program. Both the Senate and House called for temporarily funding the program in their Obamacare replacement bills, but the repeal effort stalled after the Senate’s stunning rejection last week.
Some centrist lawmakers are now pushing for immediate fixes to Obamacare, though conservative hardliners opposing Obamacare are unlikely to drop the effort to dismantle the 2010 health care law. Earlier Monday, a bipartisan group of more than 40 House members released a proposal for a short-term marketplace stabilization package that would include funding for the subsidies.
“It doesn’t take a doctor to diagnose that the individual market across the country is not healthy and urgent action is needed to help our constituents,” said Rep. Martha McSally (R-Ariz.) in a statement announcing the proposal.