The president took two decisions – expanding access to cheaper, skimpier insurance and scrapping federal subsidies – that may transform healthcare

Dismantling Obamacare: what has Trump done and who will it affect?

Donald Trump took two extraordinary steps to undo his predecessor’s signature health law on Thursday, measures that could fatally damage Obamacare despite the repeated failure of Republicans in Congress to repeal it.

Having expanded access to cheaper and less comprehensive insurance – which experts predict will result in health plans for the sick becoming more expensive – with an executive order on Thursday morning, the president issued a surprise notice that night scrapping federal subsidies underpinning the system.

Trump’s actions could undermine the health marketplace millions of Americans depend on and hurt some of the US’s most vulnerable people. The president spent much of his campaign issuing vague promises to replace Barack Obama’s health law – which expanded coverage to nearly 20 million people – and he has been frustrated by his fellow Republicans’ inability to coalesce around a plan to do so.

What exactly did Trump do?

Unlike most developed countries, the US does not have a national health system, and since Americans have the most expensive system in the world, even a hospital trip can be financially ruinous. This is why health insurance is such a necessity.

Most Americans get insurance one of three ways: through government programs for the poor and elderly called Medicaid and Medicare, through their employer, or through the online marketplaces set up by Obama’s Affordable Care Act in 2010.

It is those online marketplaces that Trump’s moves this week will affect.

The group using the marketplaces is dominated by small business owners and the self-employed. Marketplace plans are tightly regulated with a standard set of benefits, including maternity care, mental healthcare, and prescription drugs.

On Thursday, Trump changed that system in two ways.

First, he signed an executive order to allow health insurers to sell loosely regulated, cheap plans outside the marketplaces. These are called “association health plans”, and are based on the idea that small businesses should band together to get better rates from insurance companies.

Conservatives say this turns health insurance into what it should be: a “financial product” meant for emergencies and designed for the middle class.

Progressive groups have called these plans “junk”, because they are likely to have few benefits, and may not cover people when they need it most.

Second, Trump decided not to fund the subsidies the government gives insurance companies under Obamacare to make health insurance less expensive for low-income people. These are called “cost-sharing reductions”. To accomplish this, all Trump had to do was make an announcement, because a court ruled the subsidies illegal just before the Obama administration left office, before it had time to appeal.

Why did he do this?

For seven years Republicans campaigned against the ACA, which they consider unwarranted government intrusion into a private industry, and for an end to mandated high-priced insurance plans.

However, after gaining control of the presidency, House and Senate at the 2016 election, they could not agree on how to repeal or replace the law.

Killing Obamacare would have left more than 20 million Americans without health insurance, a prospect which sparked uproar. Public approval of alternative Republican health plans hovered at around 20%. And Republicans suffered one embarrassing failure after another when they tried to pass the bills through Congress.

As Trump demanded Obamacare’s repeal, he also insisted it was imploding. “Let Obamacare fail and it will be a lot easier,” Trump said after one failed legislative attempt this summer.

Characterizing the subsidies that help the poor a “bailout” for insurers, and skimpy health plans a solution to the Obamacare “nightmare”, he has now made that implosion a lot more likely.

Who will this affect?

The poor, the sick, older Americans, women and possibly small business owners will all be affected by Trump’s moves, according to doctors. About 12.7 million people rely on health insurance marketplaces created by Obamacare.

A joint statement from six physicians’ groups said Trump’s executive order on low-cost plans would probably “cause significant economic harm to women and older, sicker Americans who stand to face higher-cost and fewer insurance options”.

Democrats said the actions could cause serious, structural damage to American healthcare. Democratic congressional leaders Senator Chuck Schumer and Representative Nancy Pelosi called his actions a, “spiteful act of vast, pointless sabotage”, in a joint statement.

And the Republican senator Susan Collins, whose vote helped doom Republican repeal plans, said she was “very concerned” that Trump had ended “an important subsidy that helps very low income people”.

Will Obamacare survive?

The problem with both Trump’s ideas is they damage the ACA’s foundational concept: if the costs of the sick are spread among the healthy, insurance is cheaper for everyone when they ultimately need it.

But allowing “junk” plans and ending subsidies to the poor, Trump may have set in motion a “death spiral”, or an exodus of the healthy from marketplaces, concentrating costs among the sick.

For example, when health insurance becomes too expensive for poor people, they go without insurance. And if small business owners can buy association plans with skimpy benefits, they may also leave marketplace plans behind. That means fewer people to spread the risk to, which causes prices to rise, which causes more people to leave the markets – hence, a spiral.

Whether marketplace plans, and the comprehensive benefits they provide, can survive Trump’s decisions is an open question.

Most insurers are probably committed to selling insurance in 2018 and have set their rates. Trump changing the rules in the middle of the game could mean they lose money. Next time they may simply refuse to play.

Will Trump be blamed if people lose health coverage?

The president is sure he won’t. “We’re not going to own it,” he said in July. “I’m not going to own it. I can tell you the Republicans are not going to own it.” Earlier this week he told Forbes: “I’ve always said Obamacare is Obama’s fault. It’s never going to be our fault.”

The public seems to disagree. A recent poll showed 60% think Trump and the Republicans, not Obama and the Democrats, are responsible for the ACA’s success or failure.

“Trump will try to blame the ACA, but this will fall on his back and he will pay the price for it,” Schumer and Pelosi predicted in their joint statement.

Trump himself seemed to imply his moves – which are likely to face legal challenge – may have been brinksmanship intended to force Democrats to the table. “The Democrats [sic] ObamaCare is imploding,” he wrote on Twitter. “Massive subsidy payments to their pet insurance companies has stopped. Dems should call me to fix!”