Democrat AGs From 18 States Sue To Keep Obamacare Subsidies, But Who Really Benefits?

It did not take long for democrats to respond to Trump’s executive order halting key subsidies known as Cost-Sharing Reductions or CSRs to insurers.

On Friday, just hours after the executive order was signed, Democratic attorneys general from eighteen states as well as Washington D.C., sued President Trump’s administration to stop him from scrapping a critical component of Obamacare – insurer subsidies that allow millions of low-income people pay medical expenses, even as Trump invited Democratic leaders to negotiate a deal. The states include: California, Connecticut, Delaware, Kentucky, Illinois, Iowa, Maryland, Massachusetts, Minnesota, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia and Washington state.

Trump smiles after signing an Executive Order to make it easier for Americans
to buy bare-bone health insurance plans and circumvent Obamacare rules

The suit follows the administration’s announced plans to end the payments next week; Trump said he would dismantle Obamacare “step by step.” His latest action raised concerns about chaos in insurance markets.  Frustrated by the failure of Republicans who control both houses of Congress to repeal and replace Obamacare, Trump’s action took aim at a critical element of Obama’s signature 2010 law. “As far as the subsidies are concerned, I don’t want to make the insurance companies rich,” Trump told reporters at the White House. “They’re making a fortune by getting that kind of money.”

On Saturday morning, Trump doubled down, tweeting that “Health Insurance stocks, which have gone through the roof during the ObamaCare years, plunged yesterday after I ended their Dems windfall!”

Health Insurance stocks, which have gone through the roof during the ObamaCare years, plunged yesterday after I ended their Dems windfall!

— Donald J. Trump (@realDonaldTrump) October 14, 2017

According to congressional analysts, the subsidies cost $7 billion this year and would rise to $10 billion for 2018.

As a reminder, under Obamacare, marketplace insurance companies are required to lower deductibles and prices for doctor’s visits and other services for many enrollees. Until now, the federal government has picked up the tab, reimbursing insurers about $7 billion this year alone.

As reported previously, Democrats immediately accused Trump of sabotaging the law. The suing AGs will ask the court to force Trump to make the next payment, although legal experts quoted by Reuters said the states were likely to face an uphill battle in court. “[Trump’s] effort to gut these subsidies with no warning or even a plan to contain the fallout is breathtakingly reckless,” New York Attorney General Eric Schneiderman said. “This is an effort simply to blow up the system.”

The new lawsuit would be separate from a case pending before an appeals court in the District of Columbia in which 16 Democratic state attorneys general are defending the legality of the payments.

If the subsidies vanish, low-income Americans who obtain insurance through Obamacare online marketplaces where insurers can sell policies would face higher insurance premiums and out-of-pocket medical costs. It would particularly impact lower-middle-class families whose incomes are still too high to qualify for certain government assistance.

Trump’s order impacts 10 million people who are enrolled in Obamacare through its online marketplaces, and most receive subsidies. Trump’s action came just weeks before the period starting on Nov. 1 when individuals have to begin enrolling for 2018 insurance coverage through the law’s marketplaces.

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What is perhaps most notable is that according to CMMS data, is who benefits the most: as the map below shows, the share of marketplace enrollees receiving CSRs is the highest in southern – traditionally republican – states.

According to Bloomberg, in 2017, 58% of all marketplace enrollees received cost-sharing reductions (CSRs)—in some areas, almost all enrollees did. Insurers are still required to reduce costs for these roughly seven million enrollees. Without the reimbursement, insurers will have little choice but to hike rates or decide to not offer plans at all.

That said, Trump’s phasing out of CSRs isn’t a surprise to insurers, which had already assumed that CSR payments would end, and raised prices accordingly to cover predicted losses in states that allowed it. Some state insurance departments requested two sets of rates depending on the fate of the subsidies, while others required insurers to assume that CSRs would continue to be paid. Medica Health Plans recently exited North Dakota after state insurance officials there would not accept Medica’s high-rate, no-CSR request.

Furthermore, though insurers have already signed contracts with the federal government for 2018, the end of CSR payments gives them a potential exit clause. With less than three weeks until open enrollment, we’ll be watching closely to see if other companies choose to leave.

There is still a chance for a last minute deal: according to Reuters, Chuck Schumer expressed optimism about chances for a deal with Republicans to continue the subsidy payments. “We’re going to have a very good opportunity to get this done in a bipartisan way” during negotiations in December on broad federal spending legislation, “if we can’t get it done sooner,” Schumer told reporters.

Trump offered an invitation for Democratic leaders to come to the White House, while also lashing out at them. “We’ll negotiate some deal that’s good for everybody. But they’re always a bloc vote against everything. They’re like obstructionists,” Trump told reporters.

Trump, who as a candidate promised to roll back the law formally called the Affordable Care Act, received applause for his latest action during an appearance on Friday before a group of conservative voters. “It’s step by step by step, and that was a very big step yesterday,” Trump said. “And one by one, it’s going to come down, and we’re going to have great healthcare in our country.”

Previously, on Twitter he called Obamacare “a broken mess” that is “imploding,” and referred to the “pet insurance companies” of Democrats.

On Satuday morning, Trump tweeted that he is “very proud of my Executive Order which will allow greatly expanded access and far lower costs for HealthCare. Millions of people benefit!”

Very proud of my Executive Order which will allow greatly expanded access and far lower costs for HealthCare. Millions of people benefit!

— Donald J. Trump (@realDonaldTrump) October 14, 2017