With open enrollment for the Affordable Care Act (ACA) just days away, you're liable to notice that Obamacare (the more common name for the ACA) will look a lot different in the upcoming year.
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Most pundits, including yours truly, had written Obamacare off as dead following the election of Donald Trump as the 45th President of the United States. He'd unrelentingly campaigned on the idea of repealing and replacing Obamacare, and with Republicans retaining their majority in the House and Senate, it appeared to ensure a clean pathway for passing those reforms. After all, the House had voted on more than 60 occasions to repeal Obamacare during Barack Obama's presidency, so it seemed like a forgone conclusion that formulating a healthcare plan and repealing Obamacare would be a cakewalk.
But you know what they say when you assume things...
More than nine months after President Trump took office, Obamacare remains the healthcare law of the land. Congress tried on more than a handful of occasions to find a middle ground that'd appeal to moderate and conservative members of the GOP, but to no avail. With the GOP having virtually no shot of getting the required 60-vote majority needed to pass permanent reform legislation in the Senate, Republicans will now need to wait until budget discussions are back on the table next year before they consider a repeal and replace bill via the reconciliation process. Reconciliation only requires a majority vote, which means having two or fewer party dissenters in the Senate given the GOP's current 52-seat tally.
Trump goes nuclear on Obamacare
Needless to say, President Trump wasn't thrilled with the idea of Obamacare sticking around, especially after he'd campaigned that he would repeal and replace Barack Obama's signature health law. Over the past few months, Trump had used his most powerful weapon, the so-called "nuclear option," as a bargaining tool to coerce cooperation among his own party. This nuclear option was a threat to end cost-sharing reduction to more than 6 million people.
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Cost-sharing reductions, or CSRs, are one of two core subsidies paid to low- and middle-income individuals and families through Obamacare. The first is the Advanced Premium Tax Credit (APTC), which helps lower the cost of premiums and is given to qualifying people who earn between 100% and 400% of the federal poverty level. The second being CSRs, which help lower the costs of receiving care, such as deductibles, copays, and coinsurance. CSRs are only given to individuals and families who earn under 250% of the federal poverty level, and who purchase a silver level plan. Note that emphasis, because if you qualify for CSRs from an income perspective but purchase a cheaper bronze plan, you won't receive the CSR subsidy.
In 2014, the GOP sued then head of the Department of Health and Human Services, Sylvia Burwell, over CSR payments. Republicans alleged that only Congress had the authority to apportion funding for CSR payments, and since it hadn't been doing so, the payments were illegal and should be ceased. After two years in the legal system, Federal Judge Rosemary Collyer sided with the GOP, albeit her judgment was stayed on appeal from the Obama administration. That appeal has continued into the Trump administration.
Recently, Trump announced that he'd be pulling the plug on CSRs by ending the appeal process, thus cutting off this critical source of funding for more than 6 million Americans. Without CSRs, low-income folks will still have health coverage thanks to the APTC subsidy, but the high costs of deductibles and copays could make going to the doctor financially impossible, thus rendering their health coverage a moot point.
An emergency motion to reinstate CSRs was denied last week by a federal judge in California, which paves the way for the end of CSR payments.
Now that's what we call irony
President Trump has a number of reasons why he believes CSRs should be ended, including his overall disdain for Obamacare. The president likely believes that the quicker Obamacare is sent into a "death spiral," which is where insurance premiums skyrocket and healthier individuals drop out and choose to remain uninsured, the quicker he'll get a replacement plan on his desk.
President Trump has also opined on numerous occasions that CSRs do nothing more than line the pockets of insurance companies. Though government-sponsored members generate lower margins than private payers, the president does have a point here since government-sponsored payments are guaranteed. Anthem (NYSE: ANTM), which is the for-profit insurer company behind the Blue Cross Blue Shield brand in 14 states, has targeted consumers who'd qualify for Medicaid, Medicaid expansion, the APTC, and CSRs. Presumably, it'll also be among those who could be hurt most by the end of CSRs. Either consumers will drop out and choose not purchase insurance, even with the help of the APTC, or they'll receive care and leave insurers like Anthem on the hook for their portion of the costs.
However, there's a pretty big unintended consequence that goes along with President Trump's decision to end CSRs. These payments, which were expected to cost the federal government about $7 billion a year, are actually expected to increase the federal costs of Obamacare by $194 billion over the next decade, according to estimates from the Congressional Budget Office (CBO).
Though ceasing CSR funding will result in "savings," insurers are responding to the end of CSR payments with considerably higher premiums. We're talking about double-digit percentage increases in most states for 2018 given concerns that low-income consumers could stiff insurers with big bills. Since the federal government is still on the line for APTC subsidies, and the actions of insurers will affect all ACA enrollees, not just those who receive CSRs, the federal government is actually digging itself into a deeper hole by ending CSRs. In other words, its APTC liability goes way up. That's what we call irony -- especially given that it works opposite of the cost-cutting that President Trump is aiming for with his current tax reform plan.
Of course, this irony is limited by the likelihood of Obamacare lasting over the CBO's long-term projection of 10 years. That seems unlikely with President Trump pounding the table on reform.
No one is exactly sure what the future holds for healthcare in America at this point, but darned if it's not full of unintended consequences and/or ironies at every turn.
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