After Republicans’ seven-year effort to upend the Affordable Care Act stalled last week, President Trump took to Twitter to dive back into the debate over one of the most consequential questions looming over the ACA’s immediate future: what will happen to payments owed to insurers that could make or break some of the private insurance marketplaces.
The payments have been part of the tug of war between Democrats and Republicans over Obamacare for several years. The issue is whether the federal government will continue paying insurers for discounts the companies are required to give to the lowest-income people buying insurance on the marketplaces set up by Obamacare. Called cost-sharing reductions, the discounts lower out-of-pocket expenses like deductibles and co-pays for enrollees.
The law requires insurers to provide those discounts. Where the funds would come from, however, was less clear. The Obama administration made the payments to insurers, and Congress sued over them, arguing that Congress had to appropriate them first, which hadn’t been done. A court found Obama’s payments to be unconstitutional, but the court also allowed the administration to continue making them while it appealed the case. Trump’s administration has been paying them on a month-to-month basis. The president, however, has frequently threatened to stop the payments — as he did over the weekend on Twitter — and his head of the Centers for Medicare and Medicaid Services has reportedly tried to use them as leverage to gain insurers’ support for ACA repeal efforts (though the agency denies this). White House counselor Kellyanne Conway has said he will make a decision this week about whether to continue making the payments.
But even if the reimbursements disappear, insurers will have to continue providing the discounts to enrollees. And the prices of marketplace plans are expected to rise 20 percent on average if companies don’t receive the reimbursements. Costs would likely go up more in states that didn’t expand Medicaid than in states that did. Under the ACA,1 states could choose to expand Medicaid to everyone earning under 138 percent of the federal poverty line. In the 31 states (and D.C.) that expanded the health insurance program for the poor, people earning from 100 percent to 138 percent of the federal poverty line for the most part can’t receive subsidies to purchase insurance plans on the marketplaces and essentially must enroll in Medicaid if they want insurance and don’t get it from an employer.2 But in the 19 states that didn’t expand Medicaid, people earning from 100 percent to 138 percent of the federal poverty line can receive subsidies to purchase insurance on the exchanges (assuming they don’t have employer-sponsored coverage). And there is a larger share of low-income people buying on the marketplaces as a result, which means a greater increase in premiums if the payments go away.
The fate of the reimbursements to insurance companies doesn’t rest exclusively with Trump. Congress could appropriate the money, and some of the Republican Obamacare repeal proposals that were considered by Congress recently would have done that (at least for a time). Over the weekend, Sen. Susan Collins of Maine, the most steadfast Republican holdout on efforts to repeal the ACA, called on Congress to make the money available. Senate Majority Leader Mitch McConnell has expressed reluctance to do so, however, as have several Republican members of the House.
One point that often gets lost in this debate: Trump and other Republicans refer to these payments as a “bailout” to insurance companies, but it might cost taxpayers more not to pay them than to pay them (assuming Obamacare remains law). Fifty-eight percent of people who enrolled in a plan for 2017 were eligible for the cost-sharing reductions, and the government is expected to pay out $7 billion to insurers this fiscal year. If the government discontinues the reimbursements, insurance premiums will go up next year. Higher premiums mean the government pays more in subsidies, the other discount provided to low-income enrollees. When all is said and done, cutting the cost-sharing reductions could cost the government as much as $31 billion above and beyond what they would have paid otherwise over 10 years, according to estimates from the Kaiser Family Foundation, a nonpartisan health care think tank.
In most states, the final deadline for companies to make changes to their applications for insurance rates for 2018 is Aug. 16. That doesn’t leave much time for insurers, which need to know what the administration or Congress will do about the reimbursements in order to determine prices for next year.
Of course, what’s going to happen with these payments isn’t the only question related to the ACA that’s looming. The administration will need to decide, for example, how — or whether — it will enforce the individual mandate, the requirement that most people have insurance or pay a fine. The Department of Health and Human Services has the power to issue broader exemptions to the mandate, which would free more uninsured people from the fine. Legal scholars have argued that exempting everyone without insurance from those fines is beyond the department’s powers but that broadening the exemptions at all could increase premiums in the marketplaces or cause more insurers to leave them.
There’s also the question of what to do with the counties where no insurers currently have plans to sell coverage on the Obamacare marketplaces in 2018. If no company steps in, people in those areas won’t be able to receive the subsidies promised under Obamacare (in many, if not all, of those counties, unsubsidized insurance would be available for purchase outside of the marketplaces). The problem may be taken care of by states and insurers; Ohio officials said Monday that the state had found insurers for 19 of its 20 counties that could have been without them next year. But 12,000 people currently enrolled in 18 counties in Nevada and Indiana, as well as one more in Ohio, could end up with no way to receive subsidies.
There’s also the issue of whether the Trump administration will promote ACA enrollment the same way the Obama administration did. That includes advertising, which proved to be important to getting people signed up during Obama’s presidency. Trump officials pulled some ads earlier this year, however, and have canceled contracts for outreach programs for the upcoming open enrollment period as well. The Department of Health and Human Services has even reportedly used some of the money earmarked for enrollment efforts to pay for ads attacking the law.
Health policy experts have warned for months that these issues could destabilize the Obamacare marketplaces, and they have received extensive coverage from the media (including us). How they are handled has been much discussed through the lens of politics: Who will pay the political price if Obamacare fails? Polling suggests that the public will blame Republicans. But politics aside, how these issues are handled could influence the cost of insurance for millions of people next year (and the federal budget, since federal subsidies pick up much of the cost for more than half of enrollees). Many of the potential fixes rely on Republicans, including Trump, doing things they’ve opposed in the past.