Halting ACA subsidies would increase deficit, CBO says

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(Bloomberg) — Ending government payments that help low-income people afford to use their Affordable Care Act plans would raise total federal spending by billions of dollars over the next decade, the Congressional Budget Office said.

Halting the payments to insurers, known as cost-sharing reductions, would boost Obamacare premiums for mid-level Obamacare plans by 20 percent next year, and by about 25 percent in 2020, as insurers raise their charges to make up for the lack of payment. Since Obamacare provides separate subsidies to individuals to help them cover the cost of premiums, the overall effect would be to boost government spending, to the tune of $194 billion over the next decade.

The cost-sharing reduction payments have become a flashpoint in the political fight over Obamacare after Republicans in Congress failed to repeal or replace the law earlier this year. President Donald Trump has threatened to cut off the payments to force Democrats to negotiate changes to the program, though lawmakers, insurers and regulators have called on the administration to continue the payments.

Without the payments, insurers have said they may drop out of the Affordable Care Act’s exchanges or substantially raise premiums. Already, insurers have said uncertainty over how the Trump administration plans to run the law is contributing to large requested premium increases for next year.

The insurance subsidies are the subject of an ongoing legal battle, after Republicans said they were illegal and successfully sued in 2014 to block them. The ruling is on hold pending a decision on an appeal started by the Obama administration, which has been handed over to Trump’s White House.

The current administration’s stance is that it could drop the case -- and stop making the payments -- at any point. However, a judge has ruled that a group of states can take up the legal defense, potentially making it harder for the Trump administration to end them. Congress could also pass legislation saying the payments should be made.

Bloomberg News