If Potentially Illegal Obamacare Subsidies Being Paid to Insurance Companies Stop – How This Will Affect Your Health Insurance?

Cost Sharing Reduction Subsidies are subsidies that lower the out-of-pocket costs for those earning less than 250% of the federal poverty level. These subsidies reduce the amount that a person will pay toward the overall deductible, coinsurance and copayments of the original plan.

However, a court has previously ruled that these subsidy payments are not legal, because Congress never appropriated money to pay for them. That ruling was stayed pending an appeal by the Obama administration. So the Trump administration could decide to continue the appeal and make those payments, or drop the appeal and accept the judge’s ruling.

That decision will have a big impact on the availability of coverage, and on the out-of-pocket costs for lower-income Americans.

President Trump’s Plan of Action on Obamacare Subsidies

A few weeks ago, President Trump threatened to cut these Obamacare subsidies, in order to get Democrats back to negotiating reform. However, as of April 26, President Trump now says that the administration will continue paying controversial Obamacare subsidies. However, since we all know that the President has a tendency to change his mind about things, it’s still hard to tell if the subsidies are here to stay or not.

How Would Eliminating Cost Sharing Subsidies Affect Insurers?

The insurance companies that are currently participating in the federal and state exchanges rely on the subsidies to cover some of the out-of-pocket expenses for people who qualify. The subsidies are part of calculations used by insurance carriers to determine what premium rates they will need to file with the state each year.

Since insurance premium rates need to be filed between May and June for the following year, carriers must decide if they want to take the chance of filing without being certain about whether they will receive these subsidies; or, as many carriers have already done, simply choosing to pull out of the individual exchange market for next year.

How Will This Affect Consumers?

With costs of health insurance continuing to rise and insurance carriers facing catastrophic losses, the real threat remains of carries leaving the market. This means less insurance options for consumers, and will likely mean only one, or even no on-exchange plans being available.

It will also leave lower-income policyholders with greater out-of-pocket exposure than they currently have.

Obamacare is indeed imploding on its own. While I don’t think it is likely, a decision by the Trump administration to accept the court’s ruling will definitely accelerate the demise of the current system.

  Date posted: Tuesday, May 2nd, 2017
Category: Health Care Reform

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