Trump Administration Will Continue Paying ‘Illegal’ Insurance Subsidies

President retreats from cutting off payments, deemed unlawful by a judge, to quicken Obamacare's collapse

by Brendan Kirby | Updated 06 Sep 2017 at 6:15 PM

The federal government — at least for another month — will continue paying insurance company subsidies that President Donald Trump had suggested eliminating in order to pressure Congress to repeal Obamacare, MarketWatch first reported Wednesday.

The subsidies, known as cost-sharing reduction (CSR) payments, are intended to provide help with deductibles and out-of-pocket expenses for insurance customers earning up to 250 percent of the poverty line. It is separate from the subsidy that reduces monthly premiums for customers making up to 400 percent of the poverty line.

Congress, however, never specifically authorized the CSR payments when it passed the Affordable Care Act. Last year, a federal judge in Washington declared the payments illegal, but she delayed her ruling from taking effect to give the government a chance to appeal. That case remains pending in the D.C. Circuit Court of Appeals and has been on hold to give Congress a chance to repeal and replace the health law.

But the legislative effort collapsed last month when several proposed bills failed to clear the Senate.

Ending the payments would be one of the most dramatic steps Trump could take if he wanted to follow through with his threat to "let Obamacare explode." But MarketWatch quoted a White House spokesman who indicated that the payments for August would be made.

On Tuesday, the Congressional Budget Office projected that cutting off the payments would further destabilize already-shaky private insurance markets, leading to higher premiums for "silver"plans and an increase in the federal budget deficit by $194 billion through 2026.

Rep. Mark Walker (R-N.C.) said in a statement that the Senate should go back to work and come up with an Obamacare repeal that could address the issue without relying on "illegal" payments that House Republicans challenged in a 2014 lawsuit.

"We cannot dig our hands into a hole $20 trillion deep to bail out insurance companies," he stated. "Even worse, we will be adding insult to injury by masking the failures of Obamacare at the expense of hardworking taxpayers. The people of North Carolina are already paying enough because of Obamacare's pitfalls."

David Bozell, chairman and president of ForAmerica and a strong supporter of repealing Obamacare, said it would be a mistake to cut off the payments without addressing the larger issues of the health system's failings.

"It was the right call," he said. "It's a savings for the country."

Bozell said he understands why Trump talked about pulling the plug on the payments. The president, he said, wanted to cajole Republicans in Congress to honor their yearslong promise to repeal and replace the Affordable Care Act.

"I encourage him to continue doing that," he said. "At some point, the Obamacare gravy train has got to stop."

Charles Blahous, the J. Fish and Lillian F. Smith Chair at George Mason University's Mercatus Center, said cutting off the payments would be risky.

"The payments, if they were to stop, would risk creating a situation where the administration would shoulder the blame for the problems in the health insurance markets," he said. "And the health insurance markets already have enough problems."

Blahous said the forecast makes the "counterintuitive" projection that cutting off the subsidies actually would help some low-income customers. For instance, a "silver" plan customer earning 125 percent of the poverty line would face higher premiums, but since his premium subsidies also would rise, the plan would cost only $4 more a month. He also would be eligible for a more-comprehensive "gold" plan with no net premium payments. Previously, it would have cost $4,800.

"The CBO report," he said, "is one of the most fascinating documents I've seen come out of the CBO."

(photo credit, homepage and article images of Trump: Gage Skidmore, Flickr)

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