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Trump Axes ACA Cost-Sharing Subsidy Payments to Insurers

Robert Lowes
October13, 2017

In another body blow to the Affordable Care Act (ACA), the Trump administration announced yesterday that it would immediately stop reimbursing private insurers for reducing out-of-pocket expenses for lower-income individuals under the law.

President Donald Trump has said in interviews and tweets that the demise of these so-called cost-sharing reduction (CSR) payments would cause the ACA's health insurance marketplaces, or exchanges, to implode, forcing Congressional Democrats to negotiate legislation to repeal and replace the law. The decision to end these payments to insurers, put at roughly $10 billion for 2018, follows the president's executive order yesterday to expand low-cost, low-benefit health plans that ACA supporters say will weaken the exchanges by diverting young, healthy Americans from them.

Most people enrolled in an individual or family health plan sold on an exchange receive a CSR, an income-based subsidy that reduces deductibles and other out-of-pocket expenses. Insurers have warned that if the government stops reimbursing them for providing these subsidies, they'll be forced to raise premiums in 2018, which would hurt individuals who do not receive a premium subsidy under the law, or else drop out of the exchanges, as other insurers have already done.

The Congressional Budget Office said in August that axing CSR payments to insurers would not kill off the exchanges, but would add $194 billion to the federal deficit over 10 years. That's because as premiums increase in response to the policy change, so do premium subsidies received by most enrollees.

Medical societies such as the American Medical Association along with the hospital industry have pleaded with the Trump administration to continue funding the CSRs to preserve the exchanges and coverage for some 10 million people. The Senate Health, Education, Labor, and Pensions Committee has been working on bipartisan legislation to do just that, but its work was interrupted by yet another failed Senate Republican effort last month to repeal and replace the ACA. The White House has the ability to cut off the money based on a federal lawsuit filed by House Republicans, who argued that the payments to insurers were illegal because lawmakers never appropriated them. A federal district court judge agreed, prompting the Obama administration to appeal. The case has been on hold since then, but as the new defendant, the Trump administration can throw in the towel and abide by the lower-court ruling.

Yesterday, the administration exercised that option with an announcement from Eric Hargan, the acting secretary of Health and Human Services, and Seema Verma, the administrator of the Centers for Medicare & Medicaid Services. Hargan and Verma said the decision was based in part on a legal opinion from Attorney General Jeff Sessions.

"We believe that the last administration overstepped the legal boundaries drawn by our constitution," said Hargan and Verma. "Congress has not appropriated money for CSRs, and we will discontinue these payments immediately."

Reviewed on 10/13/2017

Trump Axes ACA Cost-Sharing Subsidy Payments to Insurers - Medscape - Oct 13, 2017.

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