Ending Obamacare subsidies would boost premiums 20%

Congressional Budget Office releases analysis

If President Donald Trump follows through on his threat to stop paying billions of dollars of subsidies critical to insurance plans under the Affordable Care Act, insurance premiums would rise by 20 percent next year, according to a new analysis by the nonpartisan Congressional Budget Office.

The cancellation of subsidies could lead some insurers to withdraw from the program, potentially leaving 5 percent of Americans living in areas with no insurance options for 2018 — although within two years, CBO said insurers should be able to adjust.

The subsidies, called cost-sharing reductions, are used to help lower-income Americans afford their deductibles and co-payments. The fate of the payments, projected to add up to $7 billion this year, is uncertain, as they have been challenged in court and are the subject of Trump’s recurring threats. Many insurers have cited the uncertainty as a reason to seek higher premiums or to leave some states’ marketplaces altogether.

But the CBO found that any premium increases will have an almost paradoxical effect: for the most part, individuals will not pay more for health insurance, but the government will. That’s because people who make up to four times the federal poverty level receive tax credits from the government that limit their monthly premiums.

Due to the way tax credits are calculated, if the premiums go up due to cost-sharing reductions being eliminated, the size of the tax credits for the people who are buying subsidized insurance in the marketplaces set up by the Affordable Care Act will grow. Ultimately, the government’s portion of those costs would cause the federal deficit to increase by $194 billion over the next decade.

One of the major fears about the marketplaces has been that there will be no choices for people to buy health insurance. That appears increasingly unlikely, though many areas of the country are likely to have only one insurer.

On Tuesday, Nevada Gov. Brian Sandoval announced that the insurer Centene would offer plans in 14 counties that had been at risk of having no insurer selling health plans on its Affordable Care Act marketplaces. That leaves two counties at risk of having no insurers selling plans next year — Menominee County in Wisconsin and Paulding County in Ohio.