President Donald Trump is halting some Obamacare subsidies. The move could mean that the government will end up spending almost $200 billion more on health insurance.
Here’s why: The subsidies clamped by Trump, known as cost-sharing reductions, are paid to insurers, reimbursing them for lowering deductibles and other out-of-pocket costs for low-income people. If the funds vanish, insurers will make up for them by boosting the cost of health coverage for everyone. Many had already said they will charge more for plans next year, on the expectation that the administration would follow through on months of threats to end the payments.
But there are other subsidies in play. More than eight in ten individuals who buy Obamacare plans also get help paying their premiums directly from the federal government. When their premiums climb, so does the cost to the Treasury.
Those subsidies effectively cap how much people have to pay for insurance as a percentage of their income. Even if premiums climb, people who receive subsidies won’t pay more. The subsidies are available to people making as much as four times the federal poverty level, or just over $97,000 for a family of four.
That means the people most likely to be hurt by the president’s action aren’t low-income people who will still get help with their costs. Instead, people who make too much money to qualify for subsidies will now have to pay a much higher price for their health plans.
It all adds up to a hefty bill for taxpayers. The Congressional Budget Office estimated that ending the cost-sharing payments would increase the budget deficit by $194 billion over the next decade as subsidy outlays jump.
