President Trump Kills Key Cost-Sharing Subsidies For Obamacare

WASHINGTON, DC — President Trump has decided to end critical Obamacare subsidies for insurance companies known as cost-sharing reductions, the White House confirmed Thursday. According to the Congressional Budget Office, the withholding the payments could cause health insurance premiums to jump by 20 percent in 2018 and 25 percent in 2020.

In a statement, the White House said it "cannot lawfully make the cost-sharing reduction payments," citing a long-running controversy about whether the funds were properly appropriated by Congress.

The cost-sharing reductions provide additional funds to insurers to cover the cost of patients who incur extensive medical bills. The White House referred to these payments as a "bail out" of the insurers. (For more information on this and other political stories, subscribe to the White House Patch to receive daily newsletters and breaking news alerts.)

Watch: Trump Administration To End Critical Obamacare Subsidies To Insurers

Without the subsidies, health insurers may pull out of the individual market and leave more states with less and less competition, which would lead to the higher premiums. However, for many people insured on the individual market, Obamacare's premium tax credits would absorb the additional costs. Only those people making over 400 percent of the federal poverty line, who receive no Obamacare tax credits, would pay the increase.

In addition to the effect on premiums, ending the payments will likley add to the deficit.

"Federal deficits would increase by $6 billion in 2018, $21 billion in 2020, and $26 billion in 2026," the CBO writes.

Under Obama, House Republicans has sued the administration to prevent it from paying the subsidies. Now, with the Trump administration withdrawing the funds, legal challenges from supporters of the subsidies may soon follow.

"Right out of the gate, I’d put dimes to dollars that that the 16 states that have intervened in the ongoing litigation will seek an immediate injunction from the D.C. Circuit to keep the cost-sharing payments flowing," writes Nick Bagley of the legal blog Take Care. "The states may also file a separate lawsuit in district court seeking the same relief. I don’t know if either gambit will work, but the states will try."

He notes that even if the states' suits fail, insurers may still have a valid claim against the federal government for the money.

Trump has toyed with the idea of ending the subsidies before, and some analysts argue that the uncertainty the administration caused in the market has already led to more expensive premiums. Congress could provide the funding insurers have been expecting, if lawmakers chose to do so.

Earlier on Thursday, Trump signed a new executive order designed to allow insurers to sell more plans that do not follow Obamacare regulations.

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