Trump’s decision to kill key Obamacare payments will cost insurers big time through end of year

Donald Trump

President Donald Trump’s decision to end key federal payments to Obamacare insurers “will lead to substantial” losses of revenue for health plans, a new analysis finds.

Avalere Health said that insurers nationally will lose $1 billion in federal funds as a result of Trump’s dramatic move, unless it is reversed by Congress or halted by court order.

The cost-sharing reduction payments reimburse insurers for discounts in out-of-pocket health costs they currently give to about 6 million Obamacare customers.

Obamacare insurers in Florida will lose the most from Trump’s decision: $200 million, according to Avalere Health.

They are followed by California insurers, which will lose about $107 million in payments, Texas insurers, which will lose about $98 million, and North Carolina insurers, which will lose about $66 million, the analysis found.

Many insurers, in setting their Obamacare plan premium prices for 2018, had accounted for the possibility of the payments being ended during that year by requesting higher rates than they otherwise would have.

But Trump’s decision to end the payments effective last week — after months of threatening to do so — means insurers will have to eat the loss of that money through the end of 2017, since they are not able to adjust their current premium prices upwards to absorb the financial fallout.

“Plans can neither increase premiums nor exit the market at this late stage,” noted Caroline Perason, senior vice president at Avalere.

Insurers are obligated by law to offer the CSR discounts in the cost of co-payments, coinsurance and deductibles to low-income and some middle-income customers.

A family of four with a household income of between $24,600 and $61,500 qualifies for those discounts, which are separate from tax credits that most Obamacare customers qualify for that help to reduce their premium payments.

But Attorney General Jeff Sessions last week told senior Trump health officials that there was no legal basis for continuing to reimburse insurers for the cost of those discounts, because Congress never explicitly authorized the money for the payments.

More than a dozen states filed suit last week to block Trump’s decision to end the CSR payments.

Attorneys general for those states say the payments are guaranteed, and authorized by Congress, by the Affordable Care Act itself, which became law in 2010. Those states argue that there is no need for Congress to separately appropriate the CSR payments.

Several senators, both Republicans and Democrats, are working on a potential bill that would authorize the CSR payments.

The Congressional Budget Office has projected that Obamacare premiums will be 25 percent higher than they otherwise would have been in 2020 as a result of Trump’s decision.