DEFICIT WOULD INCREASE BY $194 BILLION THROUGH 2026 IF SUBSIDIES HALTED BECAUSE GOVERNMENT WOULD PAY MORE IN TAX CREDITS

A CBO report released Tuesday estimated that health law exchange premiums would rise 20% in 2018 if subsidies to insurers ended.
A CBO report released Tuesday estimated that health law exchange premiums would rise 20% in 2018 if subsidies to insurers ended.PHOTO: ASSOCIATED PRESS

Premiums for many insurance plans on the Affordable Care Act’s individual market would climb by 20% next year if the Trump administration halts billions of dollars in payments that go to insurers under the health law, the Congressional Budget Office estimated Tuesday.

The payments that help compensate insurers for reducing out-of-pocket costs have become the latest front in the battle over the health law, with President Donald Trump warning he could end the funding after Senate Republicans failed late last month to repeal the ACA.

Democrats, insurers and some governors have been urging Mr. Trump to preserve the payments in order to protect the stability of the individual insurance markets.

The report by the nonpartisan CBO and the Joint Committee on Taxation, a panel that includes House and Senate members, says the ACA markets wouldn’t implode without the funding, estimated at $7 billion this year. But it concludes that a decision by Mr. Trump to halt the payments would raise premiums for mid-priced plans and leave slightly more people without an insurer to choose from on the individual markets.

In an ironic twist, stopping the subsidies would also wind up costing the federal government more in the end, the report said. Higher premiums for mid-priced plans would require the government to pay larger tax credits to consumers to help offset coverage costs. The federal deficit would increase by $194 billion through 2026, the report said.

The assessment reflects the negotiating struggles still ahead over the ACA in Congress, where Republicans have already spent months on failed attempts to repeal and refashion former President Barack Obama’s 2010 health law. The demise of the repeal effort means the ACA will remain in place for the foreseeable future, but its markets remain fragile, with insurers promising to raise premiums or stop participating without the federal money, known as cost-sharing payments.

Now, Republicans must decide whether to work with Democrats to stabilize a law they have pledged for more than seven years to dismantle.

Already, some GOP senators are working with Democrats on a possible bill to preserve the payments to insurers. But some House Republicans opposed to the assistance, which they call a bailout for insurers, are digging in with another push for repeal.

The CBO and tax-panel report also highlights the power the Trump administration now holds over the law. Questions are mounting about whether the federal government will devote resources to the fall open-enrollment period for ACA insurance plans. And Mr. Trump has sounded intent on halting the payments, despite calls from some within his own party who fear a political backlash in the midterm elections if the premium costs rise.

“Regardless of what this flawed report says, Obamacare will continue to fail, with or without a federal bailout,’’ Ninio Fetalvo, a White House spokesman, said in a statement. He added: “No final decisions have been made about the CSR payments. We continue to evaluate the issues.”

Rep. Tom Reed (R., N.Y.,) co-chairman of a bipartisan House group that has advocated for 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.

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

Sen. 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.”

The CBO report said that rising premiums would mean that more people would qualify for cost-sharing subsidies. Also, the larger premium tax credits would make buying coverage on the individual market more attractive: While the number of people uninsured would be about 1 million higher in 2018 than in 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.

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.

The federal payments 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.

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, and 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 medical services rather than allowing providers to bill for each individual service.

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

CMS published a rule last week indicating 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.

Separately, the ACA’s markets are on increasingly stronger footing. Centene will offer health coverage on the ACA exchange in 2018 to all Nevada counties, Gov. Brian Sandoval said on Tuesday. The state had been facing the prospect of 14 bare counties.

The announcement means only two counties in the U.S. are at risk of having no insurers participating next year, according to the Kaiser Family Foundation. That’s a sharp drop from more than 40 counties that risked having no participating insurers on the exchanges a few months ago.

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

Appeared in the August 16, 2017, print edition as ‘CBO Sees a Jump In Health Premiums.’

Updated Aug. 15, 2017 8:37 p.m. ET

Wall Street Journal – http://www.wsj.com

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