The administration will stop reimbursing health insurers for the 2010 health care law’s controversial cost-sharing reduction payments, the White House said Thursday night.
“Based on guidance from the Department of Justice, the Department of Health and Human Services has concluded that there is no appropriation for cost-sharing reduction payments to insurance companies under Obamacare,” the White House Office of the Press Secretary said in a statement. “In light of this analysis, the Government cannot lawfully make the cost-sharing reduction payments.”
The statement added: “The bailout of insurance companies through these unlawful payments is yet another example of how the previous administration abused taxpayer dollars and skirted the law to prop up a broken system. Congress needs to repeal and replace the disastrous Obamacare law.”
The payments are a key part of the health care law. Without them, premiums would be projected to spike by an average of almost 20 percent, according to a Kaiser Family Foundation analysis earlier this year.
Several states have approved higher premiums for the 2018 coverage year, which begins Jan. 1, given the uncertainty. This week, California tacked on a more than 12 percent surcharge to plans that would be most affected by the loss of the subsidies. President Donald Trump has repeatedly threatened to stop paying them, saying he was prepared to let Obamacare fail. Until now, the administration has paid them on a month-to-month basis.
The subsidies, which help people who make less than 250 percent of the federal poverty limit afford certain out-of-pocket payments, are the subject of a lawsuit brought by House Republicans against the Obama administration. A federal judge last year ruled that the administration had violated the Constitution by making the payments without an appropriation from Congress. Insurers are required to help cover the assistance under the health law, but if the administration stops paying the subsidies, insurers would not be reimbursed.
The Obama administration appealed the ruling, but that has been on hold since the Trump administration took control in January. Although the administration made the payments on a month-to-month basis, officials had not committed to a long-term plan.
The move could put more pressure on Sens. Lamar Alexander, R-Tenn., and Patty Murray, D-Wash., who are negotiating a package that would provide funding for the payments and additional flexibility for states under the law. The duo still haven’t reached an agreement, and many Republicans are opposed to simply funding the subsidies, which they say would be “bailing out” insurance companies.
Rep. Mark Walker, chair of the Republican Study Committee, made it clear that House conservatives are not prepared to vote for a deal.
“Under no circumstance should Congress attempt to expand Obamacare by cutting a check for President Obama’s bailout of insurance companies,” Walker said in a statement.
The Congressional Budget Office has said that not funding the payments could raise federal deficits, since spending on subsidies to help people afford insurance would increase if insurers raise premium costs.
Some insurers may be allowed to pull out from their contracts and may scale back their offerings, which could be problematic ahead of the shorter-than-ever open enrollment that runs from Nov. 1 through Dec. 15.
A group of 18 attorneys general said before the announcement Thursday night that they would sue to defend the subsidies.
“The courts granted our intervention to defend these vital subsidies and the quality, affordable health care they ensure for millions of families across the country,” said New York Attorney General Eric T. Schneiderman, a Democrat and a leader of the attorneys general that won the right this summer to argue for the subsidies if Trump stops paying. “Our coalition of states stands ready to sue if President Trump cuts them off.”
Democratic congressional leaders criticized the move.
“President Trump has apparently decided to punish the American people for his inability to improve our health care system,” said a joint statement from Senate Minority Leader Charles E. Schumer of New York and House Minority Leader Nancy Pelosi of California. “Trumpcare collapsed because Americans overwhelmingly recognized the cruelty and higher costs it meant for them and their loved ones. Now, millions of hard-working American families will suffer just because President Trump wants them to.”
Trump’s move makes good on his vow to move quickly to dismantle Obamacare, given the congressional impasse over legislation to repeal and replace the 2010 law.
On Thursday, Trump signed an executive order directing three federal departments to consider making regulations to expand access to lower-cost, less comprehensive health care plans, which health policy experts have warned could undermine the individual insurance marketplaces.
Trump said the development was the start of a series of executive actions to undermine the health care law and give people more freedom.