Insurance Companies Say Premiums May Increase After Government Subsidies Stop

President Trump says the administration will no longer pay key Affordable Care Act subsidies. The result could be some consumers pay more for insurance coverage and the cost to the government rises.

KELLY MCEVERS, HOST:

In a tweet earlier today, President Trump called the Affordable Care Act insurance markets a broken mess. Most economists say that's an exaggeration and that the markets, in fact, are working. Nevertheless, Trump took a step late last night that could propel the Obamacare markets to indeed collapse. He announced the government would immediately stop subsidy payments to insurance companies, payments that are legally required under the ACA. To help make up the difference, many insurance companies say they will have to increase premiums next year.

With us now to talk about this latest action by the president and how it might impact consumers is NPR health policy correspondent Alison Kodjak. Hey there.

ALISON KODJAK, BYLINE: Hey there, Kelly.

MCEVERS: So the president says these payments amount to a bailout of insurance companies. I want you to explain these payments. What exactly are they?

KODJAK: So they're known as cost-sharing reduction subsidies, which is a mouthful, but you hear people referring to them as CSRs. And under the Affordable Care Act, insurance companies have to give the lowest-income people discounts on deductibles and co-payments. And the law says the government will reimburse the companies for that. And that's what these payments are.

MCEVERS: Right. So these are subsidies for lower-income people basically.

KODJAK: Yes.

MCEVERS: OK, so those payments are going to stop. How will that affect people?

KODJAK: So the people that get these discounts aren't going to lose them. The insurance companies are required by law to offer the discounts. So people have these policies, will still get their low deductibles and their low co-payments. But the insurance companies aren't just going to take that loss. So they have said - and when they file rates with their states, which they have to do under the Affordable Care Act, they've said they'll raise their premiums to make up for that lost income.

MCEVERS: Does that mean they will go up for everyone?

KODJAK: Well, not exactly. The top-line premiums will be higher. But again, the Affordable Care Act law, it's really complex. And it tries to protect people from these fluctuations in insurance rates. So in addition to these discounts that we just talked about, most people who buy insurance on the ACA exchange also get a tax credit to reduce the cost of their premiums. And those credits are designed to keep those costs stable. So if premiums rise, the tax credits rise, too. And so that means, like, if I pay $200 a month for my insurance with the help of a tax credit, next year I'll probably still just pay $200 even if the advertised premium's higher. And the government's going to have to pick up the tab.

MCEVERS: Who would this affect the most?

KODJAK: Well, you know, the people who are most likely to see an increase in their costs are the people who don't actually qualify for those tax credit subsidies on their premiums. That means people who have relatively high incomes - a family of four with an income of about $100,000. That's where that starts. And they will have to absorb the full premium increase because they don't get any sort of tax credit at all.

MCEVERS: And then what about the cost to the government? I mean, that sounds like it's the goal here - right? - is the government pays less.

KODJAK: It would sound like that. But the Congressional Budget Office, which analyzed these things for Congress, they say this is actually going to cost the government more. And that's the irony. By stopping these payments, which are about $7 billion a year in total, the president could increase the cost because those tax credits go to so many more people that if premiums go up across the board, they're going to be paying out a lot more in tax credits. So it's a little bit of a miss on the budget, and it could hurt a lot of middle-class families.

MCEVERS: Alison Kodjak, thank you so much.

KODJAK: Thanks, Kelly.

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