President Trump’s decision to cancel key ObamaCare payments could be backfiring.
Trump has claimed the health-care law is “imploding,” and earlier this month he took an action seemingly aimed at that goal: cutting off subsidy payments to insurers known as cost-sharing reductions.
Democrats cried foul, calling it the biggest example yet of what they say is Trump’s “sabotage” of ObamaCare, efforts that include cutting enrollment staff and reducing advertising.
But there are inadvertent benefits of Trump’s action: Many ObamaCare enrollees are actually getting a better deal and the potential to get more generous insurance because Trump cut off the payments.
“It sounds very counterintuitive that premiums going up a lot could actually lead to many people paying less for health insurance,” said Larry Levitt, a health policy expert at the Kaiser Family Foundation. “But that is the way the math works.”
The reasons are complicated, in large part due to a quirk in the way ObamaCare’s subsidies to help people afford insurance are calculated and in the ways regulators and health plans prepared.
Before the action, state regulators and insurers anticipated that Trump would cut off the subsidy payments, which reimburse insurers for discounts to low-income people, and planned ahead.
Insurers raised premiums on one type of plan, known as “silver” plans, to compensate for the loss of the payments. Silver plans are the ones used to calculate how much of a subsidy consumers get.
If the plans are more expensive, people get a bigger subsidy. So the higher premiums lead to bigger subsidies, which consumers can now use to buy another type of plan, even a more generous “gold” plan, at a lower cost than they otherwise would have.
The result is that the majority of ObamaCare enrollees are either held harmless or actually able to buy coverage at a lower cost than if Trump had not cut off the payments.
A minority of enrollees, those who earn too much to qualify for subsidies and live in a handful of states that did not plan ahead, are going to be hit with the brunt of the premium increases.
The big loser is the federal budget, given that the government will have to pay out billions more in subsidies to compensate for the higher premiums.
Democrats had also warned that insurers could simply drop out of the ObamaCare market, leaving some people without any options at all, if Trump canceled the payments.
But that so far has not happened. Insurers largely planned ahead, and there have not been any major exits since Trump announced he would cancel the payments.
The counterintuitive benefits of Trump’s move were a key reason that a federal judge on Wednesday ruled against a collection of states suing to force Trump to keep the payments going.
The judge, appointed by President Obama, pressed the states, led by California, to show what actual harm had occurred because Trump canceled the payments.
“It seems like California is actually doing a really good job of responding to the termination of these payments in a way that is not only avoiding harm for people, but actually benefitting people,” Judge Vince Chhabria said at a hearing on the lawsuit this week.
A separate legal question is whether the payments were constitutional to begin with, given that Congress did not appropriate them. The administration cited that as a reason to cancel them, but Trump has also pointed to broader anti-ObamaCare reasons.
Some ObamaCare supporters warn that the benefits of the payments being canceled depend on consumers being knowledgeable and savvy enough to shop around and find a deal.
In practice, many consumers are confused, given the debate over repeal of the law and the surrounding frenzy, and might be hit with a premium increase because they did not realize they could find a better deal on a different plan by shopping around on healthcare.gov.
“Even despite best efforts to educate consumers, it’s going to be really hard to get out the word that there are better deals out there,” said Topher Spiro, vice president for health policy at the left-leaning Center for American Progress.
“In practice, in reality, there are going to be a lot of consumers who see increased costs because of this,” he added. If people don’t shop around and stick with the same plan, they could be missing out on a deal and still face a price hike.
The Trump administration has cut back on outreach funding, which experts say could depress enrollment and lead to fewer ways for consumers to get their questions answered.
David Anderson, a health policy researcher at Duke University, has argued that Democrats might actually be wise not to seek to reinstate the payments and simply let the higher subsidies give people better deals on insurance.
The Congressional Budget Office projected in August that cutting off the payments would initially lead to slightly fewer people insured, but by 2020 would actually increase the number of people with coverage by 1 million, due to the higher subsidies.
Anderson said that it could be a “significant Democratic policy win” to keep the cost-sharing reductions canceled.
The counterargument, noted by Anderson and others, is that there is a psychological benefit to having both parties working to make the law better and that the stability of the law could be boosted by a bipartisan bill to reinstate the payments.
Spiro echoed this argument, calling for Congress to pass a bill from Senate Health Committee Chairman Lamar Alexander (R-Tenn.) and ranking member Patty Murray (D-Wash.) to reinstate the payments and make other reforms.
“If there a good-faith effort to have a bipartisan bill that addresses this issue then you have both parties wanting to make the law work, not trying to sabotage it,” Spiro said.
There is also the risk of confusion if the payments remain canceled and that consumers would not seek out the deals available to them.
“It’s confusing to me and this is what I do for a living,” Anderson said. “It’s going to be very confusing to anyone.”