How the Blowup of Obamacare Affects the People on It

Last week, the president ended an important subsidy insurers were relying on to set their prices. What now?

Updated Oct. 18 at 10 a.m.

Last week President Trump triumphantly tweeted, “Money pouring into Insurance Companies profits, under the guise of ObamaCare, is over.” He was celebrating the fact that his administration had just ended cost-sharing reductions, payments that the government had been making to insurers to make insurance cheaper for their low-income customers.

Health-policy experts noted that this move, agree with it or not, caused “instability” in the individual-insurance market. But what exactly does that instability mean for people who rely on Obamacare for insurance, who are due to sign up for their plans in a matter of weeks?

First, it’s important to note there are two different types of subsidies in Obamacare. The first are the cost-sharing reductions—these are the ones Trump ended on Thursday. The second are tax credits that all people on the individual market who earn less than 400 percent of the federal poverty level—about $48,240 for an individual—get to lower their premiums. These are still happening.

The CSRs are the subsidies that are in danger. On Tuesday, Senators Lamar Alexander of Tennessee and Patty Murray of Washington worked out a deal to fund the CSRs through Congress for another two years in exchange for states getting more flexibility in how to structure their Obamacare plans. At a news conference, Trump appeared to support the legislation, but he later tweeted that he couldn’t support it. It remains to be seen whether it will pass. If it does, insurers could likely relax for two more years.

Still, open enrollment is 13 days away, and people shopping for insurance might already see higher prices because of the end of the CSRs. It all depends on what their state and its insurers decided to do. According to very preliminary data I’ve seen from experts, some states assumed the CSRs would continue, so they likely set their rates too low. In these states, without a CSR deal in Congress, there’s a risk some insurers might pull out of the individual market because they will lose money.

Gary Claxton, a vice president at the Kaiser Family Foundation, said he doesn’t think very many insurers will pull out for this coming year. Instead, it just adds to their wait-and-see attitude about being in the individual market. “At this point, everyone is taking it one year at a time,” he said.

In other states, insurers submitted two sets of rates—one if the CSRs continued and one if they stopped—and will simply go with the higher rate. Others assumed the CSRs would end and loaded the extra cost onto the Silver-level plan. (Silver is the plan level that CSRs were connected to. The other tiers are Bronze and Gold.)

People who receive the tax credits might not notice the end of the CSRs, because the tax credits are pegged to the cost of health insurance. Their tax credits will rise along with the rates. However, the end of the CSRs might make Gold and Bronze plans even cheaper compared to the Silver plan, which would bear the cost of the lost CSRs. In that case, people who get tax credits might actually be getting a better deal by going with a nicer, more robust Gold plan.

“This might be an odd year where the names of the tiers don’t correspond with the premiums they’re seeing,” said Dania Palanker, a professor at the Center on Health-Insurance Reforms at Georgetown University’s Health-Policy Institute.

It’s people who don’t receive Obamacare tax credits—those who make more than $48,240 a year—who will really suffer from the loss of the CSRs. For them, rates would go up, and there would be no help from the government to soften the blow. “Ironically, it is these unsubsidized folks who have complained the loudest about Obamacare’s big premiums and deductibles,” said Robert Laszewski, a health-insurance industry analyst, in an email. “They will now have even more to complain about.”

Either way, Palanker says, the thing to do next is the same thing you should do every year if you don’t get health insurance through work: Go to Healthcare.gov and shop. You’ll see all the plans and their prices, and you can choose the one that’s best for you.

During a Monday Cabinet meeting, President Trump said, “Obamacare is finished, it's dead, it's gone ... there is no such thing as Obamacare anymore.” But while he is doing his best to dismantle it, it’s not quite dead yet.