President Trump delivered a one-two punch to health care on Thursday, announcing the end to cost-sharing reduction subsidies just hours after he signed an executive order creating more options to sidestep regulations under Obamacare.
After the GOP-led effort to repeal and replace Obamacare failed in Congress, Trump appears intent on undermining elements of the legislation.
In addition to cutting down the enrollment period, significantly reducing the budget for outreach and taking down the Healthcare.gov website for 12-hour stretches due to maintenance, the Trump administration has introduced changes that could roil the health insurance market.
While the main tenets of the legislation remain intact, the changes could affect low-income Americans, small businesses and short-term health plans, creating knock-on effects across the entire market.
On Thursday night, the White House announced the end of cost-sharing reduction subsidies for lower-income Americans who buy individual insurance through Obamacare.
Those covered through their employers are unaffected.
Under the Affordable Care Act, the government pays health insurers on a monthly basis for an estimated annual cost of $7 billion this year.
The money reimburses health insurers for lowering copays, deductibles and out-of-pocket costs for people with low incomes who earn too much to qualify for Medicaid.
That includes people with household incomes up to 2.5 times the poverty line (up to $30,150 for one person or $61,500 for a family of four), which make up nearly 3 in 5 people with individual insurance.
While the Human and Health Services issued a statement saying the subsidy payments would be discontinued immediately, insurers are still required to reduce cost sharing.
Without the federal governments help, insurers will likely raise premiums to make up for the lost revenue.
According to the Congressional Budget Office, premiums could increase 20% in 2018, and 25% by 2020. Federal deficits would increase by $6 billion in 2018, and shoot up to $26 billion in 2026.
State attorneys general are also likely to file lawsuits, arguing the subsidies to insurers are fully authorized by federal law.
Leading GOP lawmakers have also called for continuing the payments and a bipartisan deal between Sen. Lamar Alexander (R-Tenn.) and Sen. Patty Murray (D-Wa.) could also fund the subsidies if it manages to pass.
Currently, states oversee individual insurance and most small business plans, as well as coverage offered through associations, while health insurance through large employers is regulated by the federal government.
On Thursday, Trump signed an executive order to make it easier for small businesses and possibly individuals to band together across state lines to buy insurance through association health plans.
Under the executive order, the association health plans could bypass regulations under the ACA requiring broad coverage including emergency services, maternity care, mental health, and prescription drugs.
The White House claims the executive order will increase health care options, promote competition, and drive down prices.
People who don’t take regular medication or rarely go to the doctor might find cheaper and skimpier options tailored more to their needs. The same goes for a small businesses with mostly young, healthy employees.
However, this option could upset a delicate balance needed to control prices, since insurers depend on the money they collect from healthy customers to counter claims they pay for the sick. Without those healthy customers, the cost might rise faster for people with medical conditions.
Changes in regulations could also allow the association plans to deny coverage or charge more based on the medical history of some customers.
Consumer protection also may suffer. Federal regulators generally have fewer resources for investigating complaints or helping consumers than their state counterparts, said Mila Kofman, executive director of the D.C. Health Benefit Exchange.
The executive order calls on Departments of the Treasury, Labor, and Health and Human Services to act, and new regulations could take several months before they are in effect.
Details are slim so far, and any regulation might also encounter legal challenges or resistance from parties like state insurance regulators.
The sign-up season for 2018 individual health insurance starts Nov. 1. It is unlikely any changes would happen by then.
Currently, short-term plans, which are exempt from several rules, are offered for a maximum of three months.
People who do not sign on to another plan by the end of three months are subject to a tax penalty.
The executive order on Thursday could do away with some of the restrictions, making short-term plans last as long as 11 months, for example.
It remains unclear how the plans will change, but looser regulations will likely lead to healthier people opting for short term plans to avoid paying the cost of broader coverage. This will in turn drive up costs for sicker customers.
With News Wire Services