Health subsidies used by millions face uncertainty
Every six weeks, Oakland resident Adeeba Deterville gets a blood test to monitor the effects of a medication she is taking to manage a thyroid disorder.
Because Deterville, a full-time doctoral student, earns less than $30,000 a year, she qualifies for federal subsidies that lower her insurance deductible and out-of-pocket costs for services like prescription medication, as well as doctor’s visits.
Deterville, 54, is one of 680,000 Californians who benefit from the financial assistance, known as “cost-sharing subsidies,” which were created under the Affordable Care Act to help the poorest Americans pay for health care. Without the extra financial help, Deterville said, medical services would be too expensive.
“If you make it unaffordable, it’s no longer the Affordable Care Act,” Deterville said. “It guts the very thing it’s named after. So what’s the point?”
The federal government spends $7 billion a year on these subsidies nationwide, and about $750 million of it goes to help low-income residents of California, like Deterville. The future of the subsidies is in limbo: A lawsuit challenging the legality of the payments is on hold before a federal appeals court. The outcome is largely in the hands of the Trump administration, which has the power to continue or halt the stream of money.
Supporters of the Affordable Care Act, which was championed by the Obama administration, say the subsidies help more people afford insurance, which helps spread the risk of costly care across more people. Critics fundamentally disagree with the law’s mandate to buy insurance, subsidies or not.
The Trump administration has not made a decision on how to proceed with the subsidies, a spokeswoman for the U.S. Department of Health and Human Services said Tuesday. The department’s secretary, Tom Price, has been one of the most vocal opponents of the subsidies. In 2016, after a lower court ruled that the Obama administration had implemented the payments improperly because Congress did not explicitly approve the funds, Price, then in the House of Representatives, praised the decision as “a momentous victory against the Obama administration’s overreach of constitutional authority.”
The continued uncertainty is vexing insurers, which in the coming weeks must start notifying regulators whether they plan to continue selling plans on state health exchanges in 2018, and how much they will charge in rates. Many insurers say that without the subsidies, they would have to raise their premiums significantly or consider withdrawing from the exchanges. That is because the subsidies go to insurance companies, not directly to consumers, to reimburse them for essentially offering more generous plans to people who would not be able to afford them without the subsidies.
The Affordable Care Act, the federal health care law passed in 2010, created two streams of federal subsidies: the premium subsidies that help millions of Americans pay for their insurance plan, and the cost-sharing subsidies that help them with co-pays, prescriptions and other out-ofpocket costs. Millions of people, including Deterville of Oakland, receive both.
Of the 12 million Americans who buy plans on the exchanges nationwide, 58 percent, or 7 million people, receive cost-sharing subsidies, according to an April analysis by the Kaiser Family Foundation. In California, about half the 1.4 million people on the Covered California exchange receive the subsidies.
“They help people afford the coverage they have,” said Chris Sloan, a policy analyst at the health care consulting firm Avalere Health. “Once you have the plan, you still have to pay for things. If you’re making $18,000 a year, a $3,000 deductible essentially prices you out of using your health insurance. The (cost-sharing subsidies) are to help people afford to use their coverage.”
The CEO of Molina Health, a California insurer that sells plans on Covered California and in 11 other states, has said that without the subsidies, his company would have to raise premiums 10 to 12 percent. If the subsidies were eliminated, insurance premiums for plans sold on the exchanges would jump 15 percent in states like California that expanded Medicaid under the Affordable Care Act, according to the Kaiser analysis.
The lawsuit challenging the subsidies was filed in 2014 by the GOP-led House of Representatives, which sued the Obama administration, arguing that the Department of Health and Human Services lacked the authority to implement the payments. A federal judge sided with the House, but the Obama administration appealed the decision.
After Trump took office in January, his administration asked the appeals court to hold off on the case while Congress attempted to repeal and replace the Affordable Care Act. The replacement legislation, which had attempted to eliminate the subsidies, did not have the votes to pass the House and Republican leaders pulled it last month.
Now the Trump administration could simply drop the legal appeal, which would halt the subsidies by allowing the federal judge’s ruling to stand. But for now, the Department of Health and Human Services is continuing the subsidies while the litigation is ongoing.
In a twist, Price is now the defendant in the lawsuit for which he was once a plaintiff when he was a member of the House.