CBO: Ending subsidies would send premiums, deficits higher

White House says ‘no final decisions’ had been made regarding payments

WASHINGTON — Premiums for the most popular health insurance plans would shoot up 20 percent next year, and federal budget deficits would increase by $194 billion in the coming decade, if President Donald Trump carried out his threat to end certain subsidies paid to insurance companies under the Affordable Care Act, the Congressional Budget Office said Tuesday.

The subsidies reimburse insurers for reducing deductibles, co-payments and other out-of-pocket costs that low-income people pay when they visit doctors, fill prescriptions or receive care in hospitals.

Even before efforts to repeal the Affordable Care Act collapsed in the Senate last month, Trump began threatening to stop paying the subsidies, known as cost-sharing reductions. He said the health care law would “implode” and Democrats would have no choice but to negotiate a replacement plan. Trump described his strategy as, “Let Obamacare implode, then deal.”

Those threats continue, although the Trump administration has paid the subsidies each month.

The nonpartisan budget office has now quantified the cost of the threats and potentially handed Democrats a weapon to force Congress and the administration to keep the money flowing.

“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,” the Senate Democratic leader, Chuck Schumer of New York, said. “He’s the president and the ball is in his court — American families await his action.”

If Trump stops payment of the subsidies, the budget office said, insurers will increase premiums for midlevel “silver plans,” and the government will incur additional costs because, under the Affordable Care Act, it also provides financial assistance to low-income people to help them pay those premiums.

Insurers in some states would withdraw from the market because of “substantial uncertainty” about the effects of the cutoff, the budget office said. About 5 percent of the nation’s population would have no insurers in the individual insurance market next year without the subsidies, it said. By contrast, if the subsidies are paid, fewer than one-half of 1 percent of people would be in such areas, the report said.

The federal government helps pay premiums for low-income people by providing them with tax credits, which generally insulate them from insurance price increases.

“Gross premiums for silver plans offered through the marketplaces would be 20 percent higher in 2018 and 25 percent higher by 2020 — boosting the amount of premium tax credits according to the statutory formula” in the Affordable Care Act, the budget office said.

The budget office does not foresee much change in the number of people who are uninsured if the cost-sharing subsidies are halted. “The number of people uninsured would be slightly higher in 2018 but slightly lower starting in 2020,” it said.

A White House spokesman, Ninio Fetalvo, said Tuesday that “no final decisions” had been made regarding the subsidy payments.

“Regardless of what this flawed report says, Obamacare will continue to fail with or without a federal bailout,” Fetalvo said. “Premiums are accelerating, enrollment is declining, and millions are seeing their options dwindling. This disastrous law has devastated the middle class and must be repealed and replaced.”

The dispute over the subsidy payments dates to 2014, when House Republicans filed a lawsuit asserting that the Obama administration was paying the subsidies illegally because Congress had never appropriated money for them. Last year, a federal judge agreed. The judge ordered a halt to the payments but suspended the order to allow the government to appeal. The case is pending before the U.S. Court of Appeals for the District of Columbia Circuit.

The Trump administration has been providing funds for cost-sharing subsidies month-to-month, with no commitment to pay for the remainder of this year, much less for 2018.

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. “If he follows through with his threats,” Pelosi said Tuesday, “President Trump will be single-handedly responsible for raising premiums across America by 25 percent, exploding the deficit by nearly $200 billion, and creating more bare counties” without insurers.

Trump and some Republicans in Congress call the payments a bailout for insurance companies. But under the Affordable Care Act, insurers are required to provide the discounts to low-income people, who they say are the real beneficiaries.

About 6 million people are receiving the cost-sharing subsidies, according to the Department of Health and Human Services. Terminating those subsidies would save the government $8 billion next year and a total of $118 billion through 2026, the budget office said. But those savings would be swamped by the increased cost of premium tax credits, it said.