Health Insurers Could Be Hurting Over Subsidy Elimination

By Susan Rupe

Health insurers who sell coverage on the Affordable Care Act marketplaces are “left holding the bag” as a result of President Donald Trump’s order to end federal cost-sharing subsidies, a health care observer said Friday.

Jay Hancock, senior correspondent with Kaiser Health News, answered questions during a Facebook Live event about Trump’s most recent attempt to unravel the ACA.

“Just because the federal payments are halted doesn’t mean insurers can change immediately what someone’s deductibles or copayments are,” Hancock said. With insurers already having set their premiums for the 2018 enrollment season, Trump’s most recent action “leaves insurers holding the bag.”

Open enrollment for 2018 begins Nov. 1, so that leaves little time for health insurers to react to the cost-sharing subsidies’ end. But most had already considered the possibility of the subsidies’ elimination when they calculated 2018 premiums, Hancock said.

Still, he said, some insurers may elect to leave the marketplaces in some states.

“The timing on this is exquisitely terrible,” he said. “Insurers have already set their rates for 2018 – some factored [the subsidies’ elimination] in and some didn’t. The ones who didn’t may say they’re pulling out of the market. Everybody’s scratching their heads.”

The cost-sharing subsidies are worth an estimated $7 billion, but Hancock said the irony of Trump’s decision to stop paying them is that the federal government may end up paying more money over the long run as a result.

The Congressional Budget Office estimated that eliminating the subsidies could cost the federal government more than $200 billion over the next 10 years, Hancock said.

“Under the ACA, people who buy health insurance are automatically entitled to subsidies if their incomes make them eligible,” he said. “The effect of Trump’s executive order is that you get rid of the cost-sharing subsidy to the insurers but premiums go up which triggers even higher subsidies to consumers. The net effect will cost the federal government even more than if the subsidies were left in place.”

Trump’s executive order ending the payments to insurers is not the final word on the issue, Hancock said.

“Congress could fund the CSR subsidies in a day,” Hancock said. He said many Congressional Republicans are feeling the pressure to act, particularly from angry constituents who are not entitled to subsidies for health insurance and are seeing their own insurance premiums skyrocket. This group of constituents is primarily made up of small businessmen and are typically Republican, so this is a group that GOP lawmakers can’t afford to ignore, Hancock said.

Lawsuits are another avenue, he said. The attorneys general of California and New York already announced their intent to file suit over this issue, and health insurers are likely to sue as well. “The insurers are entitled to the cost-sharing reduction payments but Congress didn’t appropriate the money for them,” he said.

“A likely scenario is that some judge might enjoin the subsidies from being cut off or intervene in some way,” Hancock said.

The latest effort to dismantle the ACA “is government dysfunction at its worst,” Hancock said. “Whether you are a fan of the ACA or not, this isn’t the way to manage it. It shouldn’t be that complicated for our leaders to do something about this.”

He added that although the executive order doesn’t affect the subsidies that consumers receive to enable them to buy coverage, “if there aren’t any plans to buy, all the subsidies in the world won’t help you.”

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].