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This is how Obamacare might actually explode

(Rachel Orr/The Washington Post)

This story has been updated.

The Trump administration is sending mixed messages on billions of dollars in federal payments that make deductibles affordable for millions of Americans and are a top priority for health insurers considering whether to sell Affordable Care Act health plans next year.

The administration said it will continue making the payments while a lawsuit that challenged whether they are legal is ongoing. But a spokeswoman stressed Tuesday that no final decisions have been made about the long-term future of the payments or the lawsuit.

"The administration is currently deciding its position on this matter," Alleigh Marré, a spokeswoman for the Department of Health and Human Services said in an e-mail. "No decisions have been made about how the administration will proceed."

The payments were challenged in court by House Republicans, who won their case, under the previous administration. The Obama administration appealed the case, and Trump inherited the case, which has been put on pause as Republicans tried to craft a replacement plan. The payments are continuing to be made, and will be until the lawsuit is resolved, an administration official said.

The ongoing uncertainty has the potential to undermine a key part of the Affordable Care Act's efforts to expand coverage, even if Republicans fail to deliver on their pledge to repeal the law.

Insurers are looking for guidance on the payments as they near deadlines as they need to make preliminary decisions soon about whether to offer plans in 2018 and what rates to set. Without any certainty, insurers facing deadlines may decide not to sell plans on the marketplaces set up by the Affordable Care Act or be forced to raise their premiums significantly.

Despite efforts to rekindle repeal talks, insurers have remained largely focused on whether payments embedded in the law, called cost-sharing reductions, are going to continue as they make decisions about selling plans next year. A recent Congressional Budget Office analysis found the markets would “probably be stable in most areas” under the current law, but if billions of dollars in payments made under current law are discontinued — or even at risk of disappearing — it could scare off insurers.

“I think insurers needed a clear signal yesterday,” said Larry Levitt, a senior vice president at the Kaiser Family Foundation. “Actuaries are working away on their spreadsheets right now, and with each passing day the uncertainty and lack of clarity increases the chances of insurers exiting.”

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The cost-sharing payments are the less well-known part of the financial help that the Affordable Care Act provides, but the support is baked into the plans bought by more than half of the 12.2 million people insured through the exchanges. The payments — estimated to add up to $7 billion this year by the Congressional Budget Office — allow lower-income people to buy plans with smaller deductibles and copays.

Daria Cross of Redlands, Calif., was one of more than seven million people who this year took advantage of the reductions, and said they have been a lifesaver for her family.

Cross suffers from a rare, poorly understood neurological disease that sometimes causes her so much pain she can't stand up. Because of how complicated Cross's medical needs are, the family bought two plans last year, outside of the Affordable Care Act exchanges. The plan that covered Cross's husband and two children came with a $6,000-per-person deductible that made it virtually unusable. She liquidated her retirement account to help pay medical bills and sometimes resorted to putting premiums or coinsurance payments on credit cards. The family was crushed by medical bills, spending more than half of the income from their family business on premiums, co-insurances and other medical expenses.

This year, the monthly premium of the plan within the exchanges is about $600 — more than the plan she chose for her husband and kids last year, but with much greater benefits. She expects her health-care costs will be about half of what she paid for herself alone last year, in part due to cost-sharing reductions.

“It’s just changed everything for us,” Cross said. “It’s all very precarious for me. I’ve got no retirement. I’m disabled. We’re trying to hold on to the house. We have two kids, and trying to make the business work right now.”

Ceci Connolly, president of the Alliance of Community Health Plans, said that if the funds were to go away, the nonprofit insurers that her group represents have said they would either have to make a difficult decision about staying in the market at all, or hike premiums anywhere from 7 to 21 percent.

A Kaiser Family Foundation study found that if the payments were halted, states with federally run exchanges would see premiums for a benchmark insurance plan rise by 19 percent, on average — with the increases steeper in states that did not expand Medicaid. Mario Molina, chief executive of Molina Healthcare, which has about a million members insured in the marketplaces, has predicted that discontinuing the payments could push premiums 10 to 12 percent higher. Last year, more than two-thirds of Molina's members on the exchanges benefited from the payments.

To qualify for cost-sharing reductions, people must make between $24,300 and $60,750 for a family of four. While tax credits help bring down the monthly cost of premiums, the cost-sharing payments provide essential funding to lower the other health-care costs that politicians complain about: the deductibles and copays that follow. The amount of the reductions varies depending on how much money people make, but they are most generous for those who make the least — and are often integrated into the plan in a way that may not be readily apparent to consumers.

“It’s baked in — it’s designed to be seamless for the consumer, but that makes the benefit hidden as well,” said Anthony Wright, executive director of Health Access California. “That was a policy decision that was beneficial for the patient and driven by policy, but probably hurts the politics of making people recognize the benefit.”

In California, for example, a silver plan typically comes with a deductible of $2,500. For a person who makes 1 to 1½ times the poverty level, that deductible drops to $75 because of the reductions. Co-pays drop from $35 for a primary care office visit to $5. For those who make 1½ to 2 times the federal poverty level, the deductible is $650, and co-pays are $10. Cross's family receives a more modest reduction, with a deductible of $2,200 and office visit co-pays of $30 — a benefit she feels grateful for every time she gets a new bill in the mail.

The specter of losing the cost-sharing reductions has put insurers and consumer advocates on the same side.

Wright called the lawsuit a “wrecking ball” that, if it goes through, would raise premiums not just for lower-income people, but for everyone. Ultimately, he argued that such premium hikes would shift costs, increasing the amount the government has to spend on subsidizing people's premiums.

Kurt Wrobel, the chief financial officer for Pennsylvania-based Geisinger Health Plan, two-thirds of whose 47,000 exchange members benefit from cost-sharing subsidies, said that the financial hit could be significant if those payments are discontinued. Those who receive the most generous financial help could expect to be on the hook for $1,700 more if plans next year passed on those costs to consumers. That could persuade those people insurance isn't worth it and cause them to opt out.

That means that taking away the cost-sharing reductions could have a broader ripple effect. Plans will have to raise premiums, and those hikes could make health insurance less attractive, particularly to healthy people who can risk going without it. That could leave more sick people in plans than healthy ones, driving up premiums even more.

He said that consumers may not be aware of how much they benefit from the federal payments unless they are revoked.

“My sense is that it might be one of those things they may not fully understand the mechanism now; once it’s taken away, they’ll understand it fairly quickly,” Wrobel said.