Just hours after President Donald Trump signed an executive order to begin the process of dismantling the Affordable Care Act, commonly referred to as Obamacare, he announced the end of the Cost Sharing Reduction (CSR) payments provided to insurers. Without the subsidies, which help offset the cost of providing coverage to lower-income households, many will see their premiums rise.
As reported by CNBC, the move isn’t entirely unexpected as Trump had been threatening to cut the payments for months. However, the impact is notable, as premiums will likely spike and some insurance companies may choose to exit the marketplace.
Insurers were expected to receive approximately $10 billion in subsidies during 2018, allowing them to offer lower-cost plans to lower-income families who qualify. In some cases, insurance companies had already increased their 2018 premiums in anticipation of the payments being unavailable.
Obamacare advocates, healthcare providers, patient groups, insurers, and multiple state officials have all expressed concerns about ending the CSR payment program. Two months ago, an estimate from the Congressional Budget Office showed that premiums would end up being 20 percent higher than originally thought if the payment program ended. They also stated that the federal deficit would increase by almost $200 billion if the payments ceased.
The discounts insurers were providing to low-income households using the Obamacare system were required by law. However, a successful challenge by congressional Republicans regarding the CSR payments not being expressly authorized by Congress opened the door for their removal.
Obamacare customers will still be eligible for federal tax credits, and the removal of the CSR payments will increase the total amount claimed by Americans who purchased their plans through the marketplace. The tax credits adjust based on premium prices, so, if premiums go up, so do the tax credits.
Reports state that it is the additional tax credits that are likely to cost the government more money than it would have continued with the CSR payments.
While approximately 85 percent of those who purchase healthcare through the Obamacare exchange qualify for tax credits, the other 15 percent do not and will have to shoulder the burden of the rising insurance rates.