President Donald Trump threatened to cut off funding for Obamacare subsidy payments Monday morning, echoing a statement he made Saturday as he continues to push Congress to repeal and replace Obamacare.
Trump tweeted Monday that “If ObamaCare is hurting people, & it is, why shouldn’t it hurt the insurance companies & why should Congress not be paying what public pays?”
If ObamaCare is hurting people, & it is, why shouldn’t it hurt the insurance companies & why should Congress not be paying what public pays?
— Donald J. Trump (@realDonaldTrump) July 31, 2017
The president threatened members of Congress Saturday, promising lawmakers that if they fail to pass a bill to repeal and replace Obamacare he would quickly put an end to federal funding for Obamacare subsidies.
The Trump administration is funding these subsidy payments on a month-to-month basis.
Insurers are required under the current system to provide subsidy payments, commonly known as CSRs, to low and moderate income individuals that participate in the state exchanges. To make consumers put more “skin in the game,” Obamacare effectively raised deductibles to levels that are tough for many Americans to meet without some financial support. CSRs were instituted to help insurers with the costs of the deductibles that patients can’t otherwise meet.
Individuals making $30,000 a year would have trouble paying a roughly $6,000 deductible that is common under the current system. Federal subsidy payments ease the burden on low income consumers and allow them to participate in the state exchanges. These payments also provide insurance companies with a sense of security when offering plans on the exchanges.
As insurance providers have dropped out of, or greatly reduced their exposure to, the Obamacare state exchanges, they repeatedly note as a primary reason uncertainty as to whether or not the Trump administration will continue to pay out these subsidy payments. The federal government is slated to pay out $7 billion in CSRs in 2017 and $10 billion in 2018. (RELATED: Insurance Companies Ditching Obamacare Follow A Similar Pattern)
The problem for Trump and Republican leadership is that if the president decides to stop funding the program for 2017, he puts insurers who are already paying out billions in CSRs in hot water, leaving them without any chance of reimbursement from the federal government.
Due to the way Obamacare is structured, if Trump chooses to not reimburse insurers for CSRs, insurers would be forced to increase plan premiums. Insurers will not simply eat the difference between what the enrollee pays and what they are left to cover. The excess cost will be shifted to the larger consumer base through higher premiums.
Premiums in 2018 are already expected to increase by double-digit percentages in 2018, but abruptly ending funding for Obamacare subsidies is likely to cause them to skyrocket even more.
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