Health Exchange Premiums Would Rise 20% in 2018 If Subsidies Ended, CBO Estimates -- 3rd Update

Premiums for middle-priced plans on the Affordable Care Act's individual market would climb by 20% in 2018 if the federal government halted the billions of dollars in payments it sends to insurers under the health law, the Congressional Budget Office estimated in a report released Tuesday.

Insurers and supporters of the law say the federal payments are essential to sustaining the already fragile individual ACA insurance markets, but President Donald Trump has warned that he could halt the subsidies. Insurers have said that if that occurred, they would raise premiums or leave the individual markets.

Mr. Trump and some Republican lawmakers oppose the funding, saying the money was never appropriated by Congress and it amounts to a bailout for insurers.

Premiums for mid-priced plans sold on the ACA's exchanges would rise if the payments were suspended, which would require the government to pay larger tax credits to consumers that help offset the cost of coverage, according to the report by the nonpartisan CBO and Joint Committee on Taxation. As a result of that and other factors, the federal deficit would increase by $194 billion through 2026, the report said.

The assessment could stoke bipartisan efforts in the Senate to pass legislation preserving the payments in 2018. Lawmakers have a tight window to move a bill through both chambers of Congress, because insurers face a late September deadline for committing to the ACA markets for next year.

The CBO and taxation committee report said about 5% of people would live in areas with no insurers in the individual market in 2018 if the subsidies ended, because insurers would withdraw or not enter those markets.

"If a new HealthCare Bill is not approved quickly, BAILOUTS for Insurance Companies and BAILOUTS for Members of Congress will end very soon!" Mr. Trump tweeted on July 29, after Senate GOP lawmakers failed to pass a bill to repeal most of the ACA.

The federal payments, known as cost-sharing subsidies, compensate insurers for reducing out-of-pocket costs for some low-income consumers who sign up for plans on the exchanges. About seven million people qualified for the subsidies in 2017.

Democrats seized on the report to assert that Republicans and the Trump administration were threatening to sabotage health insurance.

Brian Schatz (D., Hawaii) wrote on Twitter on Tuesday afternoon that "the president of the United States is causing health care premiums to go up because he's mad. Let that sink in."

Rep. Tom Reed (R., N.Y.,) co-chairman of a bipartisan House group that has advocated formally authorizing the cost-sharing payments, called Tuesday's CBO report "another log on the pile of pressure" on Congress to act.

He said the adverse effects that CBO highlighted would disproportionately hit rural counties in GOP-held districts. "Politically and substantively, I just don't understand how you could stand in front of a town hall and say, 'I'm sorry I didn't do anything because ideologically I wanted to go a different route,'" he said.

Federal deficits would increase by $6 billion in 2018, $21 billion in 2020, and $26 billion in 2026, the report said.

The rise would come in part because the government, under the health law, would have to pay larger tax credits to people that help them afford insurance if premiums rise. In addition, rising premiums would mean that more people would qualify for cost-sharing subsidies.

Also, the larger premium tax credits would make purchasing coverage on the individual market more attractive: While the number of people uninsured would be about 1 million higher in 2018 than an earlier estimate, it would then be 1 million lower in each year starting in 2020, the CBO estimated.

Premiums for the mid-priced plans on the exchange would be 25% higher by 2020, the CBO projected.

Insurers, governors and some lawmakers have been urging the Trump administration to preserve the payments, which are estimated at $7 billion this year and $16 billion by 2027.

Sens. Lamar Alexander (R., Tenn.) and Patty Murray (D., Wash.) are planning hearings on legislation to shore up the ACA markets following failed GOP efforts to replace most of the health law. The legislation would likely continue the payments in 2018 while giving states greater flexibility in how to implement the ACA, a change that Republicans have sought.

Mr. Trump could choose to end the payments on his own. The cost-sharing subsidies also face a legal threat. House Republicans sought in a 2014 lawsuit to block the payments. A federal district judge in May 2016 ruled that the payments were improper. The Obama administration appealed. Payments to insurers have continued in the meantime.

In another sign the Trump administration may pare back parts of the health law, the Centers for Medicare and Medicaid Services has proposed canceling two Obama administration programs aimed at attaching a fixed price to a set of medical services, rather than allowing providers to bill for each individual service.

The payment model, known as bundled payments, was a pilot program under the ACA aimed at reducing medical spending by emphasizing the results of care, rather than the volume of services provided to patients.

CMS published a rule last week indicating that it planned to cancel bundled payments for heart attacks and bypass surgeries, along with an expansion of a joint-replacement payment program that would have included hip surgeries. Both payment programs were scheduled to take effect on Jan. 1.

Write to Stephanie Armour at stephanie.armour@wsj.com

(END) Dow Jones Newswires

August 15, 2017 16:23 ET (20:23 GMT)