Cutting off contested Obamacare payments would greatly increase premiums and taxpayer spending on subsidies that chase those rates, budget scorekeepers said Tuesday in dour estimates of what will happen if President Trump and congressional Republicans refuse to keep the money flowing.
The Congressional Budget Office said insurers would increase their rates for popular mid-level plans by an estimated 20 percent in 2018 and 25 percent in 2020 and subsequent years to make up for the loss “cost-sharing reductions” that reimburse them for picking up low-income customers’ costs.
As a result, federal deficits would increase by nearly $200 billion over the 10-year budget window — despite savings from axing the payments — largely because subsidies rise with the cost of mid-tier plans on the insurance exchanges set up under the 2010 Affordable Care Act, the analysts said in a report requested by House Democratic leaders.
The report will likely increase pressure on Republicans to maintain the payments, known as CSRs, so long as Obamacare is on the books.
Mr. Trump is letting the money flow to insurers on a month-to-month basis but hasn’t committed to them long-term, as he seeks leverage over Democrats who refuse to abandon President Obama’s signature health law.
The financial uncertainty is already prompting insurers to request rate hikes well above what they’d otherwise seek, since plans are required to pay the costs whether or not they are reimbursed by the government.
“Try to wriggle out of his responsibilities as he might, the CBO report makes clear that if President Trump refuses to make these payments, he will be responsible for American families paying more for less care,” Senate Minority Leader Charles E. Schumer said. “He’s the president and the ball is his court – American families await his action.”
CBO analysts said the share of areas with no insurers offering plans would increase slightly amid the upheaval in 2018 — about 5 percent of the population would have no choices — but options would return to nearly all areas by 2020, as companies adjust to the new reality.
The CBO said the number of uninsured would increase by 1 million in 2018, mainly due to insurers dropping out of the marketplace.
But the dynamic reverses itself in later years. The number of Americans lacking insurance would be 1 million lower in each year starting in 2020, as the exchanges become more attractive to certain consumers, according to the CBO.
“What happens is that insurers increase silver premiums, which are the benchmark for premium subsidies. It’s a wash for people eligible for cost-sharing reductions, since they have to enroll in silver plans to get that assistance,” said Larry Levitt, a senior vice president at the Kaiser Family Foundation.
Yet among people who qualify for premiums subsidies but not the cost-sharing reductions, “it’s a windfall,” Mr. Levitt said. “They could take their higher premium subsidies and enroll in bronze or gold plans. This has the perverse effect of increasing subsidies people receive under the Affordable Care Act and increasing the federal cost of running the program.”
The CBO estimated a net increase of $247 billion in subsidy spending — $365 billion more for premium tax credits, minus $118 billion for cost-sharing subsidies — over the coming decade.
Combined with ripple effects on Medicaid enrollment and the taxable income of people dropping off employer-based coverage, the CBO estimated an $194-billion increase in deficits by 2026.
Mr. Trump is still fuming over the collapse of GOP efforts to repeal and replace his predecessor’s health overhaul last month.
He’s threatened to let Obamacare “implode” by killing the payments. Yet instead of coming to the negotiating table, Democrats have highlighted the administration’s actions as “sabotage.”
A recent Kaiser foundation poll said over three in five Americans oppose “hardball” tactics that could disrupt the markets, such as threatening to withhold cost-sharing payments, though most Republicans and Trump supporters said it was an OK way to get Democrats to the negotiating table.
The poll also found more people want Mr. Trump and the GOP-controlled Congress to focus on making the current program work than reigniting the repeal effort, underscoring the political risk for Republicans moving forward.
“A majority of Americans agree that it is time for Trump to move on from his reckless plans to repeal the Affordable Care Act,” said Democratic National Committee spokeswoman Adrienne Watson. “Instead of breaking his promise to make healthcare accessible to all, Trump should work with Democrats to build upon the progress made under the Affordable Care Act.”
Congressional Republicans who could appropriate the money are split over the payments, with many conservatives blasting them as a “bailout” for insurers. They’re loath to front the money unless it is part of a clear transition from Obamacare to a GOP-favored health care plan.
Congress has never approved the payments and when President Obama paid them anyway, the GOP-led House took him to court. A judge ruled the payments illegal, but has stayed her decision while it’s under appeal.
A federal appeals court recently said more than a dozen Democratic state attorneys general may step in and defend the payments should Mr. Trump attempt to drop the case.