Congress may have called timeout on trying to repeal and replace the Affordable Care Act (aka Obamacare), but Americans who buy health insurance on their own have something more immediate to worry about.
An ongoing legal dispute could force an exodus of health insurers from state exchanges as early as this year, leaving millions without access to affordable health plans.
The Trump administration has the power to decide whether this will happen, and so far hasn’t said whether it will or won’t.
“It really comes down to whether they want to continue to make the exchanges work,” says JoAnn Volk, an ACA expert at the Georgetown University Center on Health Insurance Reforms. “If they don’t, this is a sure and quick way to unravel them.”
Uncertainty over the outcome of this matter is stressing out health insurance companies who are, at this moment, trying to decide whether to continue participating in the exchanges in 2018.
Under the ACA, the government gives money to health insurers so they can offer lower-income consumers special Silver plans with much lower out-of-pocket costs than usual.
The lowest-income buyers can get plans with an average deductible of about $250, compared with a deductible of about $3,600 for the same type of Silver plan without the subsidy.
Nearly 60 percent of people buying insurance through the state exchanges take advantage of these so-called cost-sharing reductions, and insurers collect about $7 billion a year from the government to fund them.
In 2014 the Republican majority in the House of Representatives sued the Obama administration, claiming that the cost-sharing subsidies should stop because Congress hadn’t specifically appropriated the money for them. And last year, a federal court agreed with them.
At the moment, the court’s order is on hold while awaiting the result of an appeal. Meanwhile, the Trump administration has continued to reimburse insurers for these subsidies—but hasn’t said whether it will continue to do this indefinitely.
What happens next
If the new administration decides to stop defending the lawsuit, allows the court order to take effect, and stops paying the subsidies, the only way the subsidies could continue is for Congress to appropriate the money, which it hasn’t done so far.
If the subsidies end mid-year, “the way the law is written, insurers are obligated to continue the plans even if they don’t get reimbursed,” Volk says. “And that’s just not a workable proposition. They’re likely to eliminate these plans because they can’t continue to operate them without these subsidies.” Depending on the rules of a particular state, the plans could be gone within a few months, Volk said.
How subsidized plans work
The loss of the special Silver plans would affect more than just the people who have them, Volk said. These subsidized plans are simply variations of regular Silver plans. Insurers can’t get rid of just the ones with the subsidies; they’d have to cancel all of them.
But the ACA also says that if insurers don’t offer a Silver plan, they can’t sell any plans on the exchanges, which means they’d have to cancel their other exchange plans too.
That would leave consumers no choice but to switch to off-exchange plans. But enrollees can’t use tax credits to lower premiums unless they buy on the exchange. That would likely make off-exchange coverage unaffordable for most of the 85 percent of exchange customers who get the tax credits.
“The cost-sharing reduction subsidies are our No. 1 priority at this time,” says Kristine Grow, a spokesperson for America’s Health Insurance Plans, the industry’s main trade group. “Health plans need to know what the rules of the road will be for next year. We’re hoping there’s still time to take action here.”
Nancy Metcalf is an award-winning independent journalist specializing in health topics. A senior writer and editor for Consumer Reports for more than 25 years, she is a nationally recognized expert on health insurance and health reform.