CBO: Ending cost-sharing reduction payments will increase premiums, federal deficit

Tabitha Dunn
August 18, 2017

President Donald Trump's threat to cut off federal funding that holds down down co-payments and deductibles for low-income policyholders would drive up both insurance premiums and the federal deficit, according to a new analysis by the Congressional Budget Office.

Most policyholders wouldn't feel the pain because higher subsides would cover the increase premiums. But it could cause a shift in which plans are popular with marketplace customers as insurers realign some of their prices to defray the loss of the federal payments, the CBO said.

"Obamacare is hurting more people than it is helping, forcing Americans to buy insurance they don't like, don't need, and can not afford", he said in a statement.

The cost of those higher premiums would land primarily on taxpayers, not on individual consumers.

The cost of a "silver" insurance plan under Obamacare would be 20 percent higher in 2018 and 25 percent higher by 2020 compared to current law, according to the report.

The cost-sharing reduction payments to insurers are not guaranteed by the ACA.

The HHS memo says "there have been no changes regarding HHS's ability to make cost-sharing reduction payments to insurers". And because many consumers hit by the premium increases will qualify for increased insurance purchasing tax credits for the federal government, the CBO estimates killing CSR subsidies would actually increase federal budget deficits by $194 billion over ten years. The CBO will release an estimate this week of how removing the Obamacare subsidies would affect the individual health insurance market.

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Government Share of ACA Premium Hikes Adds $194 Billion to Federal Deficit
The subsidies are snared in a legal dispute over whether the Obama health care law properly approved the payments to insurers. Carriers have until September 5 to finalize their rate requests and until September 27 to commit to participating next year.

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Obamacare's exchanges are still fragile: Many insurers raised premiums and pulled out of some markets previous year after finding the customers who signed up tended to be sicker and more expensive than they hoped.

But the administration has continued paying the subsidies month to month as it waited for Congress to overhaul the Affordable Care Act.

How is it possible that not paying a subsidy would cost the government money?

The budget office study was requested by the House Democratic leader, Nancy Pelosi of California, and the House Democratic whip, Steny H. Hoyer of Maryland. No final decisions have been made about the [cost-sharing reduction] payments.

In the wake of Anthem's announcement, Gov. Terry McAuliffe lambasted the Trump Administration, saying it needed "to stop playing politics with people's lives and come together in a bipartisan way" to provide certainty to the insurance industry.

In late July, after Republicans failed in their effort to repeal the health care law, Trump said that he wanted to "let Obamacare implode".

"The CBO analysis makes clear that ending cost-sharing subsidies would be a flawless example of cutting off your nose to spite your face", says Larry Levitt, a vice president at the Kaiser Family Foundation. A number of insurers have mentioned uncertainty over the payments in increasing insurance premiums by double-digits for 2018, or in exiting some individual insurance markets.

Other reports by Guamnewswatch

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