How Will Trump's Obamacare Subsidies Halt Affect Premiums? The Federal Deficit Will Suffer

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The Trump administration announced Thursday night it would stop providing Obamacare's cost-sharing reduction payments, which are designed to keep health care costs down for low-income Americans. Researchers have warned of the consequences, which include pushing insurers out of the marketplace and causing a spike in premiums, the amount Americans pay every month for health insurance. This could lead to a rise in the number of uninsured Americans — something the White House is unlikely to mention. The Trump administration is also unlikely to shine a spotlight on another potential consequence of ending Obamacare subsidies: a rise in national debt.

The Congressional Budget Office estimates that stopping the cost-sharing reduction payments would raise federal budget deficits by $6 billion in 2018 and $194 billion over the next 10 years. Thursday's statement from the White House, however, does not mention the federal budget. It instead addresses what the Trump administration calls "unlawful" federal payments:

The bailout of insurance companies through these unlawful payments is yet another example of how the previous administration abused taxpayer dollars and skirted the law to prop up a broken system. Congress needs to repeal and replace the disastrous Obamacare law and provide real relief to the American people.

It might seem counterintuitive at first that slashing spending would increase debt, but as the report explains, in order to offset the spike in premiums, the federal government would have higher costs for premium tax credits. Your premium is based on your "metal tier." The Affordable Care Act, also known as Obamacare, and the health insurance marketplace offer four tiers based on how you and your insurance company will split the costs of your health care: Bronze, Silver, Gold, and Platinum. Silver is considered to be the mid-level tier with moderate premiums. The Congressional Budget Office estimates that after terminating Obamacare subsidies, premiums for silver-level plans would rise on average by 20 percent in 2018.

Eligible individuals and families, usually low- and moderate-income people, can claim the refundable tax credit to cover their premiums. The Kaiser Family Foundation estimates that eliminating Obamacare's cost-sharing reduction payments will save the United States $10 billion in 2018. But the additional expense of premium tax credits would cost $12.3 billion, resulting in an overall worse deficit.

Democratic leaders are unhappy with the Trump administration's continued efforts to chip away at the Affordable Care Act. In a joint statement, House Minority Leader Nancy Pelosi (D-CA) and Senate Minority Leader Sen. Chuck Schumer (D-NY) criticized Trump's subsidy freeze as "a spiteful act of vast, pointless sabotage" against Obamacare.

House Speaker Paul Ryan (R-WI), however, said the decision "preserves a monumental affirmation of Congress's authority and the separation of powers." House Republicans have previously sued the Obama administration over the subsidy scheme, calling it unconstitutional for the federal government to make cost-sharing reduction payments when Congress has not appropriated the money. The judge ruled in the Republicans' favor, but payments were allowed to continue during the ongoing appeals process.

Under the Affordable Care Act, about 6 million low- and moderate-income people qualify for cost-sharing reduction payments. Ending the payments could make health care more expensive for many Americans. Insurers in some states — including Trump strongholds — would withdraw from or not enter the market in 2018. Then health care could become unavailable for people living in areas with no marketplace insurers. The number of uninsured would rise by 1 million in 2018, the Congressional Budget Office estimates.

Despite this information, the GOP seems determined to erase and replace the Affordable Care Act. "Obamacare has proven itself to be a fatally flawed law, and the House will continue to work with Trump administration to provide the American people a better system," Ryan said in his statement.