President Donald Trump announced Thursday night that he will end the Obamacare cost-sharing reduction (CSR) payments, a move that could wreck the law’s individual insurance exchanges and send healthcare costs soaring for many Americans.
“Based on guidance from the Department of Justice, the Department of Health and Human Services has concluded that there is no appropriation for cost-sharing reduction payments to insurance companies under Obamacare,” said a statement from the White House. “In light of this analysis, the Government cannot lawfully make the cost-sharing reduction payments.”
The CSR payments help to offset the cost to insurers for offering insurance plans to poor Americans with low out-of-pocket costs. Insurers have warned repeatedly that if the payments were cut off, they would be forced to raise premiums in order to make up the financial loss.
The move comes after Trump maintained the CSR payments for the first eight months of his presidency. After the failure by Republicans to repeal and replace Obamacare, however, Trump has pursued measures to undermine the stability of the landmark healthcare law.
The CSR payments were long disputed, with the Republican-controlled House of Representatives suing the Obama administration saying that the payments were illegal since they were being appropriated by the executive branch instead of Congress.
A federal court ruled in favor of the House, but the Obama administration appealed the ruling, allowing the CSR payments to continue. During the start of the current presidency, Trump’s administration kicked the can down the road on the appeal and appropriated the CSR payments on a monthly basis, dangling the critical payments as bait in multiple negotiations with Democrats.
In August, a federal judge ruled that 17 states and the District of Columbia could continue the lawsuit even if Trump pulled out of the appeal over CSR payments since the end of the payments would directly impact people living in their state. This could allow the CSRs to continue even after this decision.
Democrats have sought to appropriate the CSR payments repeatedly, most recently in bipartisan talks between GOP Sen. Lamar Alexander, the chair of the Health, Education, Labor, and Pensions committee and the Democratic ranking member of that committee, Patty Murray.
House Minority Leader Nancy Pelosi and Senate Minority Leader Chuck Schumer released a statement decrying Trump’s actions just minutes after the decision was announced.
“Sadly, instead of working to lower health costs for Americans, it seems President Trump will single-handedly hike Americans’ health premiums,” the joint statement read. “It is a spiteful act of vast, pointless sabotage leveled at working families and the middle class in every corner of America. Make no mistake about it, Trump will try to blame the Affordable Care Act, but this will fall on his back and he will pay the price for it.”
Many Republicans have resisted appropriating the CSR payments through congressional action, but some moderate GOP members believe it is necessary to maintain stability in the exchanges.
“Cutting health care subsidies will mean more uninsured in my district,” GOP Rep. Ileana Ros-Lehtinen tweeted. “
@potus promised more access, affordable coverage. This does opposite.”
House Speaker Paul Ryan applauded the decision on procedural grounds, saying that the method of approriating the CSR payments through the executive branch was illegal.
“Today’s decision by the Trump administration to end the appeal of that ruling preserves a monumental affirmation of Congress’s authority and the separation of powers,” Paul said in a statement. “Obamacare has proven itself to be a fatally flawed law, and the House will continue to work with Trump administration to provide the American people a better system.”
How much ending the CSR payments could destabilize the market is a subject of debate. Some health policy experts believe that without the payments, the individual insurance market could be devastated with insurers leaving and premiums skyrocketing. The nonpartisan Congressional Budget Office, however, found that while the move would cause some pain in the short-run for the exchanges, eventually these markets would find their footing.
The decision also comes the same day that Trump signed an executive order to allow two different types of healthcare plans that would let people skirt Obamacare’s regulations, possibly increase costs for sick Americans, and undermine the strength of the Obamacare exchanges.