Health insurance companies are expected to raise premiums for middle class American families, following Trump’s executive order on 10/12/2017 to end government subsidy payments to the health insurance industry. The move is likely to cost the federal government hundreds of billions of dollars.
Cost-sharing reduction payments, which are payments the federal government issues to health insurance providers to reimburse them for discounts they are required by law to allow low-income people for co-pays and deductibles, will be stopped, according to Trump’s administration.
Insurance companies will still be required by law to provide discounts to low-income customers, which means that, when federal payments end, companies will raise prices for everyone to make up the difference.
Critics claim that Trump and his administration are making this move in a deliberate attempt to destabilize the health insurance markets created by Obama’s signature legislation, the Affordable Care Act, with the hope of cultivating widespread support for Trump’s alternative legislation that legislators have repeatedly failed to pass through Congress over the last year.
“Ending the CSR payments is another sign that President Trump is doing what he can to undermine the stability of the individual market under the ACA,” said Tim Jost, emeritus professor of law at Washington and Lee University.
Middle-class families who buy their own health insurance without direct financial help from the government are likely to be impacted most of all. People who earn more than 400% of the federal poverty level of income, about $48,000, or a family of four that earns $98,400, will see their costs for health insurance rise an average of 20% across the country. (Low-income individuals, who receive tax credits for purchasing health insurance, are unlikely to see their costs increase.)
But the worst part is that this move is going to cost the federal government more than reimbursing health insurance companies under the ACA would have in the first place. The Congressional Budget Office determined that Trump’s executive order will cost the federal government as much as $200 Billion over the next decade, compared to $70 Billion the existing program would have cost over the same period.
The reason is because the expected rise in health insurance premiums across the board will lead to higher tax credits to low-income people, to ensure that their costs to keep insurance stays the same. According to the Centers for Medicare and Medicaid Services, 85% of people who purchased insurance through the ACA receive some level of tax credit.
This recent decision follows another recent executive order by Trump, which is designed to allow businesses to buy cheaper health insurance policies through trade groups and professional associations, which are likely to only be accessible, and popular, with the young and healthy.
These decisions could lead to healthy and wealthy insurance customers leaving the ACA marketplace to get insurance elsewhere, while only low-income individuals and Americans with expensive, on-going medical conditions will stay with the ACA provisions, resulting ultimately in higher healthcare costs for the people who have the most to lose.
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