Brace for impact: Trump poised to 'let Obamacare explode'

President Donald Trump listens in the Roosevelt Room of the White House in Washington, Wednesday, Aug. 2, 2017, during an event to unveil legislation that would place new limits on legal immigration. (AP Photo/Evan Vucci)

President Donald Trump has been making the threat for months, if Republicans in Congress did not repeal and replace "Obamacare," or the Affordable Care Act (ACA), he would let the health care law blow up.

The Senate's inability to pass a new health care law last week has put the Obamacare detonator in Donald Trump's hands and he could soon follow through on the threat to "let Obamacare explode" by cutting off certain subsidies the government pays directly to insurance companies, causing a chain reaction throughout the individual insurance market.

According to White House counselor Kellyanne Conway the president could make the decision "this week" on whether to continue paying the multi-billion dollar subsidies to insurance companies.

President Trump has referred to the cost-sharing subsidies as "BAILOUTS for Insurance Companies." In a message over Twitter on Saturday, Trump promised that the payments "will end very soon!"

These cost-sharing reduction subsidies (CSRs) were put in place as part of the 2010 health care law to give insurance companies an incentive to provide Obamacare exchange plans for low-income Americans. Individuals making between 100 to 250 percent of the federal poverty level would have lower out-of-pocket expenses and the federal government would pay a portion of the difference.

There is now widespread concern that cutting off these payments will cause collateral damage across the entire health insurance marketplace, not just the Obamacare exchanges.


A large part of that concern is fueled by the tight deadlines faced by insurance companies and lawmakers.

Trump's timing to address the subsidy payments couldn't have been worse for insurance carriers who have until mid-August to set their rates for the next calendar year or decide to leave the Obamacare exchanges altogether. On Wednesday, Michael Consedine, CEO of the National Association of Insurance Commissioners (NAIC), which assists state insurance regulators, described players in the health care marketplace sitting on pins and needles.

"We're really at that major crunch-time decision point for all of our states in terms of [setting] rates for the 2018-2019 time period," Consedine stressed. "And having this decision out there until the very last minute has only added to the uncertainty that already existed in the marketplace."

As a result of the uncertain environment, state regulators have asked insurance companies to file two different rates for 2018, one assuming the CSRs are paid, the other assuming they aren't. The average difference between the two is 20 percent.

That's a 20 percent rate increase will impact consumers in the form of higher premiums, Consedine noted, on top of the higher health insurance costs that were already anticipated based on past experience under the Affordable Care Act.

"There was a sense that rates were going to go up, but this would just add to that it," he said.

Lawmakers are trying to assuage the concerns of both insurers and the individuals who could be hit with higher-costs in 2018 with talk of "market stability," but there are no signs that they can shore up the exchange before Trump makes a decision.

In the House, the Problem Solvers Caucus, a bipartisan group of 40 congressmen, announced a health care fix that would guarantee mandatory funding for the cost-sharing subsidies and provide a handful of other market-stabilizing measures. But based on the current schedule, the House will be out of session until after Labor Day.

In the Senate, the chairman of the Senate health care committee Lamar Alexander (R-Tenn.) and ranking member Patty Murray (D-Wash.) announced on Monday that they will hold public hearings to help them craft a bipartisan plan to stabilize and strengthen the individual health insurance market. But those hearings are not scheduled to start until the week of September 4.

That could come too late to assure the insurers.


For those who closely followed the debate over the Obamacare subsidies, a certain amount of uncertainty was inevitable.

The fate of the CSRs was already in doubt in late 2014, when House Republicans sued the Obama administration for executive overreach, specifically for promising the billion-dollar subsidies without Congress authorizing the cash.

The non-partisan Congressional Budget Office (CBO) estimated government payments for the Obamacare subsidies would be $7 billion in fiscal year 2017, and reach $16 billion by 2027.

Last year, a lower-court handed the House Republicans a victory Obamacare suit, ruling the subsidy payments were unconstitutional. But the Obama administration appealed the ruling.

That lawsuit was resurrected in the D.C. Court of Appeals on Tuesday by a group of 16 state attorneys general. The appeals court ruling could potentially make it harder for Trump to cancel the subsidies outright by allowing the states to defend the government payments to insurers.

This adds a new dimension of uncertainty. It is still not clear whether the states will be successful in defending the insurance payments, or whether Trump will exert the executive authority that was baked into the law and cancel them outright.


In the cold light of day, even Republicans who have strongly opposed Obamacare, still want to make sure the marketplace is stable for the millions of Americans who would otherwise face yet another year of spiraling health care costs.

Health committee chairman Lamar Alexander directly urged Trump to hold off on canceling the subsidies, saying that "without payment of these cost-sharing reductions Americans will be hurt."

Alexander was confident that if Congress and the White House are able to guarantee the cost-sharing subsidies will be there, "that should allow insurance companies to lower the premiums that they have projected."

Sen. Marco Rubio (R-Fla.) underscored his belief that the Senate should not walk away from health care, saying he is open to ideas that will stabilize the individual market in the short-run, but has no interest in debating ways to "permanently accept Obamacare."

"In essence, I’m not against efforts to help people in the short-term," he said, "so long as that doesn’t mean that we walk away from the promise of repealing and replacing Obamacare."

Still, within the Republican caucus, there are divisions over whether to keep the subsidies for just one more year, as Alexander and Rubio indicated, or whether them permanent.

After months of debating the health care law, other Republicans, like Sen. Ron Johnson expressed frustration that the subsidy issue was not resolved in the context of a broader repeal and replace bill.

"It’s important to understand that a US court has already ruled those payments are illegal," he said. "From my standpoint, if we’re going to throw more money at the failure that is Obamacare, we certainly should expect some structural reforms to bring down premiums so the American taxpayer isn’t put on the hook for bailing out insurance companies."

Despite regularly talking about letting Obamacare "explode" or "implode," a number of Democrats expressed doubts that Trump would risk the political consequences of canceling the insurance payments.

Cutting the federal payments would "torpedo the Affordable Care Act" and directly lead to higher premiums, said Sen. Bill Nelson (D-Fla.). "That's trying to slit the throat of health care for people who now have it who never had it before. That's why I think at the end of the day the president won't do that."

Vermont Independent Sen. Bernie Sanders, who often takes the opportunity to remind President Trump about his populist campaign pledges, similarly doubted whether Trump would undercut the insurance market. "I find it hard to believe that the President of the United States will will intentionally raise premiums by 20 percent to millions of Americans."

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