Trump to end health subsidies
Order signed to further erode tenets
WASHINGTON — President Donald Trump is planning to end key federal subsidies paid to insurance companies under the Affordable Care Act, his administration’s most drastic move yet to overhaul the health care law after Republicans in Congress failed to repeal and replace his predecessor’s signature legislative accomplishment.
The cost-sharing reduction payments help cover deductibles and other out-of-pocket costs when low-income people use their Affordable Care Act insurance plans. They’re paid monthly to insurers, and are estimated at $7 billion in total this year.
The legality of the payments is the subject of a legal dispute, and health insurers have pushed
Congress to appropriate the funds. Congressional action would effectively end the risk of the president ending them unilaterally.
In a statement, the White House said the Department of Justice and the Department of Health and Human Services both concluded that there is no appropriation for cost-sharing reduction payments to insurance companies under the Affordable Care Act.
“The bailout of insurance companies through these unlawful payments is yet another example of how the previous administration abused taxpayer dollars and skirted the law to prop up a broken system,” the White House said in the statement. “Congress needs to repeal and replace the disastrous Obamacare law and provide real relief to the American people.”
Still, any action to end the payments may face legal obstacles of its own. Seventeen states and the District of Columbia won the right in August to defend the payments in a court case. Politico earlier said the order could come as early as today.
Insurers in many states have already boosted their rates for 2018 to account for the risk that the cost-sharing payments won’t be made, after months of threats from the Trump administration to cut them off. That will reduce the financial impact on insurers next year, though how they’ll respond for the rest of 2017 wasn’t immediately clear.
Senate Minority Leader Charles Schumer and House Democratic Leader Nancy Pelosi reacted Thursday night to the reports that Trump planned to stop the cost-sharing payments.
The Democrats said Trump “has apparently decided to punish the American people for his inability to improve our health care system.” They added that “millions of hard-working American families will suffer just because President Trump wants them to.”
The decision follows Trump’s signing Thursday of an executive order that tells federal agencies to consider a number of steps that could erode many of the core tenets of Obama’s health law.
In the order, the president asked regulators to craft rules that would allow small businesses to band together to buy insurance across state lines, let insurers sell shortterm plans curtailed under the Affordable Care Act, and permit workers to use funds from tax-advantaged accounts to pay for their own coverage.
The White House and allies portrayed the president’s move as wielding administrative powers to accomplish what congressional Republicans have failed to achieve: fostering more coverage choices while tearing down the law’s insurance marketplaces.
While the administration characterized the order as a way to drive down rising premiums and expand coverage to more Americans, critics said it would undermine existing markets by encouraging healthier people to buy skimpier plans. That would likely lead premiums for Affordable Care Act plans, which offer more encompassing coverage regardless of a person’s health history, to surge.
Other experts said Trump’s proposals appear to be modest and would have limited impact.
The steps the president outlined Thursday will take months for the federal bureaucracy to finalize in regulations. Experts said consumers should not expect changes for next year.
Trump said that Thursday’s move “is only the beginning.” He promised “even more relief and more freedom” from Affordable Care Act rules. And although leading GOP lawmakers are eager to move on from their unsuccessful attempts this year to abolish central facets of the 2010 law, Trump said that “we are going to pressure Congress very strongly to finish the repeal and replace of Obamacare.”
Democrats denounced Trump’s order as more “sabotage” while Republicans called it “bold action” to help consumers. A major small-business group praised the president, while doctors, insurers, and state regulators said they have concerns and are waiting to see details.
“We want to make sure that all the consumer protections are there and included,” said Michael Munger, president of the American Academy of Family Physicians.
Many of the new insurance products could be exempt from requirements of the Affordable Care Act that Republicans say have contributed to sharp increases in premiums but that supporters say have created a base line of care that has protected consumers from “junk insurance.”
Administration officials said they had not yet decided which federal and state rules would apply to the new products.
Trump’s order could eventually make it easier for small businesses to band together and buy insurance through new entities known as association health plans, which could be created by business and professional groups. A White House official said these health plans “could potentially allow American employers to form groups across state lines” — a goal championed by Trump and many other Republicans.
Those “association health plans” could be shielded from some state and federal insurance requirements. Responding to concerns, the White House said participating employers could not exclude any workers from the plan, or charge more to those in poor health. Self-employed people might be able to join.
But state officials pointed out that an association health plan can set different rates for different employers, so that a company with older, sicker workers might have to pay much more than a firm with young, healthy employees.
“Two employers in an association can be charged very different rates, based on the medical claims filed by their employees,” said Mike Kreidler, state insurance commissioner in Washington.
The White House plan also includes easing current restrictions on short-term policies that last less than a year — an option for people making a life transition, from recent college graduates to early retirees.
Loosening the rules on short-term plans would create another option outside of the Affordable Care Act by allowing people to buy lowcost, temporary plans instead of more comprehensive, longer-term coverage.
Such short-term plans typically provide limited coverage that doesn’t pay for maternity care, addiction treatment or other areas held to be critical benefits under Obama’s law. The plans also often have annual lifetime limits and can exclude sick individuals from buying them.
Under the Affordable Care Act, these plans don’t meet the individual mandate of having health insurance, so buyers are subject to a tax penalty.
Trump’s action also is intended to widen employers’ ability to use pretax dollars in “health reimbursement arrangements” to help workers pay for any medical expenses, not just for health policies that meet Affordable Care Act rules.
“This could be much ado about nothing, or a very big deal, depending on how the regulations get written,” said Larry Levitt of the nonpartisan Kaiser Family Foundation. “The intent of the executive order is clear, to deregulate the insurance market…it’s unclear how far the administration will ultimately go.”
Levitt said association health plans and short-term health insurance policies could be designed to lure healthier people away from the state insurance markets created by Obama’s health law. They’d offer lower premiums to those willing to accept fewer benefits. That would drive up costs for consumers in the already-shaky Affordable Care Act markets, making them less attractive for insurers and raising subsidy expenses for the government.
But economist Douglas Holtz-Eakin, president of the center-right American Action Forum, said it looks like the impact will be on market niches, not the broad landscape of health insurance.
“This just isn’t a revolution to insurance markets,” he said. “It’s a policy change.”
In a statement earlier Thursday, Pelosi said, “The American people overwhelmingly rejected Trumpcare, but President Trump is still spitefully trying to sabotage their health care, drive up their costs and gut their coverage.”
But Sen. Rand Paul, R-Ky., called Trump’s action “one of the most significant free market health care reforms in a generation” that would “reduce government interference and provide more affordable health care options to everyday Americans.”
Paul attended the White House ceremony and was honored by Trump with a pen used to sign the executive order. Paul was among the handful of GOP senators whose opposition scuttled the most recent effort to repeal Obama’s law. Congressional Republicans have moved on from health care, and are now focusing on tax cuts.
President Donald Trump, surrounded by small-business owners and others, signs an executive order Thursday at the White House instructing officials to rewrite federal rules on health insurance coverage.
Sen. Rand Paul, R-Ky., stands with President Donald Trump after Trump signed an executive order on health care rules Thursday. Paul called Trump’s action “one of the most significant free market health care reforms in a generation.” Trump gave Paul the pen he used to sign the order.