President Trump has decided to stop key Obamacare payments to health insurers, adding yet another element of uncertainty to the health care law’s future.
The 10 million people who buy insurance through the Affordable Care Act’s marketplaces will now be subject to another rash of headlines about how the Trump administration is undermining and changing the law — with open enrollment less than three weeks away.
But for the immediate future, Trump’s decision won’t actually change much for most people getting insurance through the law. The marketplaces will still open. Americans who qualify for subsidies to help pay their premiums or for discounts on their out-of-pocket costs will still receive that assistance.
If you get insurance through your work or if you qualify for Medicaid under the health care law, you are completely untouched. Same goes for people on Medicare or who get their health care through the VA.
As for Obamacare’s markets, most health plans had already accounted for Trump stopping the payments with their 2018 prices. So premiums will be higher next year because of the CSR issue, but rates won’t necessarily change after Thursday’s news. Nevertheless, the end of the payments could undermine the health care law’s stability going forward — and there is still a chance Trump’s decision could disrupt the markets in the short term.
So there will be some consequences, even if we can’t say for sure exactly what they’ll be. Here’s what we do know, for now, about what will be affected by Trump’s decision and what won’t be.
1) Eligibility for Obamacare’s financial assistance hasn’t changed
The most important thing to know is that Trump’s decision to stop the payments for cost-sharing reductions, which compensate insurers for providing mandated discounts to lower-income people on their out-of-pocket costs, doesn’t change any of the ACA’s fundamentals.
If your income is between 100 percent of the federal poverty level (about $12,000 a year for one person or $24,600 for a family of four) and 400 percent ($48,240 for one person or $98,400 for a family of four), you will still qualify for subsidies that help pay your monthly premiums for the insurance you can buy on the law’s marketplaces.
If your income is between 100 percent of the poverty line and 250 percent ($30,150 for an individual or $61,500), you will still qualify for the cost-sharing reductions, which lower your deductibles, copays, and other out-of-pocket costs. Health plans are still required to provide the discounts under the law, even if Trump has stopped the federal payments that compensate them for doing so.
So when Americans log on to HealthCare.gov or their state marketplace on November 1, all of that financial assistance will still be available.
2) People who qualify for the ACA’s subsidies and discounts are protected
The majority of Obamacare customers who qualify for financial assistance should be mostly inoculated from any repercussions of the cost-sharing reductions uncertainty.
Because the president has been threatening to cut off the payments for months, many insurers have already priced the loss of cost-sharing subsidies into their 2018 premiums. Rough estimates from actuaries say that this increased 2018 premiums by an additional 10 to 20 percent.
However, people who receive subsidies don’t feel those costs. Obamacare’s subsidies are designed so that a person’s premiums are limited to a percentage of their income.
So if you make $24,120 a year, your monthly premium is capped at about $130 per month for the benchmark health care plan used to calculate the subsidies. (These are rough estimates, based on national averages, from the handy Kaiser Family Foundation calculator.) Any costs above that fall on the federal government, not the consumer.
In the same way, people who qualify for cost-sharing reductions will still receive them. Those discounts are required by law. They can dramatically lower a person’s out-of-pocket costs: For the people who qualify for the biggest reductions, their deductible falls from about $3,600 a year to $250 because of these discounts.
Axios estimated that about 8.7 million people received Obamacare’s subsidies last year. That’s more than 80 percent of the people buying coverage on the law’s marketplaces. So if you’re shopping through Obamacare, you probably receive assistance and you will largely be protected from the fallout from Trump’s decision.
3) People who don’t receive assistance bear the brunt of price hikes
There is one population that is not safe from the CSR drama: people who buy insurance on the individual market and do not receive financial aid under the ACA.
Those are people either below the poverty level in states that refused to expand Medicaid under Obamacare — though coverage is already likely unaffordable for these people and they are exempt from the individual mandate — or people who make more than 400 percent of the federal poverty level.
So if you’re a single woman making $65,000 a year or a family of four with a $120,000 income, you receive no aid under the health care law and you have to pay the full price of your insurance if you purchase a plan on the marketplaces.
The good news, if that’s the way to put it, is many health plans have already accounted for Trump pulling the CSR payments in their 2018 rates. So people ineligible for subsidies are going to see higher premiums next year because of Trump’s threats, but that was already true before he formally decided to end the payments.
According to Axios, about 6.7 million people bought Obamacare-compliant coverage without subsidies, either on the law’s marketplaces or off them. Those are the people feeling the pain from this uncertainty.
4) Known unknowns: any new premium increases or insurers leaving markets
So that’s how Obamacare should look now, if the market doesn’t go through any major changes. But what we don’t know yet is exactly how plans will react to this decision.
The most immediate questions will be: Can insurers hike their rates even more to account for the loss of CSR payments, or can they drop out of the Obamacare markets entirely?
The deadline for most Obamacare plans to be finalized has already passed. But the Huffington Post’s Jonathan Cohn noted that the federal contracts with health insurers appear to allow them to leave the market after the deadline if the CSR payments are ended. So after all the bare Obamacare counties were filled in recent weeks, new ones could pop up and thousands of people could be left without options if there is an insurer exodus.
There are also going to be some really wonky adjustments by states and insurers, because they knew this could happen. This post from a trio of experts at the Balloon Juice blog is worth reading for all the technical details, but the point is: We could end up in a situation where it is actually better to buy a higher-level plan than the usual benchmark plan. This is why it will help to talk through your options with a navigator or insurance broker. Each state and each insurer could be different in how it reacts to the president’s decision.
One last thing: Insurers are likely going to sue to force the CSR payments to be made. If they are able to quickly get an injunction to block Trump from pulling the subsidies, that could mitigate the effect of Thursday’s news.
But we don’t know yet how these unanswered questions will be unresolved. I asked two policy experts what would happen now, and they both used the word “chaos.”
That’s true, especially for the wonks who look at Obamacare systematically. But for many, many Americans who just want to buy health insurance, Trump’s decision won’t change anything. Open enrollment still starts on November 1, and financial help is still available.