The cancellation of subsidies could lead some insurers to withdraw from the program, potentially leaving 5 percent of Americans living in areas with no insurance options for 2018 — although within two years, CBO said insurers should be able to adjust to the change.
The subsidies, called cost-sharing reductions, are used to help lower-income Americans afford their deductibles and co-payments. The fate of the payments, projected to add up to $7 billion this year, is uncertain, as they have been challenged in court and are the subject of Trump's recurring threats. Many insurers have cited the uncertainty as a reason to seek higher premiums or to leave some states' marketplaces altogether.
But the CBO found that any premium increases will have an almost paradoxical effect: For the most part, individuals will not pay more for health insurance, but the government will. That's because people who make up to four times the federal poverty level receive tax credits from the government that limit their monthly premiums.
Because of the way tax credits are calculated, if the premiums go up as a result of cost-sharing reductions being eliminated, the size of the tax credits for the people who are buying subsidized insurance in the marketplaces set up by the Affordable Care Act will grow. Ultimately, the government's portion of those costs would cause the federal deficit to increase by $194 billion over the next decade.
Here's an example that shows how this works. Under the current scenario, in 2026 a 64-year-old person with an income of $56,800 — above the level where they would have qualified for a plan with cost-sharing reduction — would receive a premium tax credit of $8,550. But under the scenario where cost-sharing reductions are discontinued, the premium tax credit would grow to $11,800.
People who do not qualify for cost-sharing reductions would receive more generous government assistance in paying their premiums.
“Most people would pay net premiums … that were similar to or less than what they would pay otherwise,” the CBO projected. The number of uninsured people would be slightly fewer than under the status quo starting in 2020, the CBO said, because the more generous tax credits would make purchasing insurance more attractive.
Insurers have been insistent that the cost-sharing reductions be paid and have been seeking a commitment that they will be made on a long-term basis. The payments are made each month, and the White House has been keeping insurers in suspense each month about whether they will continue to be paid. On Wednesday, a White House spokesman said that the August payments would be made, but provided no further clarity about the remainder of the year or next year.
One of the key assumptions that the CBO made in its analysis is that the decision to stop paying the subsidies in 2018 would be made by the end of August. It has been unclear when or if the White House will make a decision about the payments to provide clarity either way.
One of the major fears about the marketplaces has been that there will be no choices for people to buy health insurance. That appears increasingly unlikely for next year, though many areas of the country are likely to have only one insurer.
On Tuesday, Nevada Gov. Brian Sandoval announced that the insurer Centene would offer plans on 14 counties that had been at risk of having no insurer selling health plans on its Affordable Care Act marketplaces. That leaves two counties at risk of having no insurers selling plans next year: Menominee County in Wisconsin and Paulding County in Ohio. A Kaiser Family Foundation analysis found that 381 people currently buy plans in those counties.