In November 2015, Martha Lucia (left) sits with Rudy Figueroa, an insurance agent, as she picks an insurance plan available in the third year of the Affordable Care Act in Miami. | Joe Raedle/Getty Images CBO: Pulling Obamacare subsidies would drive up premiums, increase deficit The CBO also projects that 5 percent of Americans would live in areas without any insurer willing to sell Obamacare coverage for next year if the subsidy payments are scrapped.

Scrapping Obamacare’s cost-sharing subsidies would increase premiums on the most popular plans by 20 percent next year and swell the deficit by $194 billion over a decade, according to an analysis by the Congressional Budget Office.

President Donald Trump has threatened to eliminate the subsidies, estimated to be $7 billion this year, before the next payments are due next week. Insurers rely on the subsidies to reduce out-of-pocket costs for low-income Obamacare customers.


Insurers have already cited uncertainty surrounding the funding as a reason for big premium increases for 2018. Health plans might decide to bolt the Obamacare markets altogether if the payments go away. They have until late September in most states to make final decisions about 2018 participation.

The CBO's assessment stopped well short of predicting such an implosion, instead forecasting a transition period of several years after which almost all markets would have coverage.

The CBO projects that 5 percent of Americans would live in areas without any insurer willing to sell Obamacare coverage for next year if the subsidy payments are scrapped. However, the agency expect most markets to again be covered by 2020, once insurers adjust to the new landscape.

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The CBO says the biggest increase in federal spending would come from larger subsidies that low-income Obamacare customers would be eligible for in order to offset the higher premiums. The nonpartisan scorekeeping agency estimates that spending on subsidies would increase by $365 billion over the next decade. That would be partially offset by $118 billion in savings from eliminating the subsidy payments.

The effects of scrapping the subsidies on health insurance coverage would be minimal. In 2018, there would be 1 million more uninsured than under current law, the CBO projects. But in 2020 and beyond, 1 million fewer Americans would lack coverage, largely because of bigger subsidies.

The agency warned, however, that all of its projections should be viewed with skepticism: “Such estimates are inherently imprecise because the ways in which federal agencies, states, insurers, employers, individuals, doctors, hospitals and other affected parties would respond to the changes made by this policy are all difficult to predict,” the analysis states.

House Republicans filed a lawsuit in 2014 arguing that the Obama administration illegally funded the subsidy payments without a congressional appropriation, and they prevailed at the lower court level. The Obama administration appealed the ruling, but the Trump administration has delayed making a decision about whether it will continue the legal fight.

However, the lawsuit won't go away even if Trump's Justice Department drops its appeal. More than a dozen Democratic state attorneys general were granted permission to intervene in the case earlier this month, successfully arguing that their interests weren't adequately represented by the Trump administration.

Congress could eliminate uncertainty around the subsidy by appropriating money.