By David Thornton
Separate from the subsidies paid to individuals, the subsidies to insurance companies are intended to offset losses that they incur under the Affordable Care Act and total $7 billion per year.
Without the subsidies, more insurance companies would exit the Obamacare marketplaces. Already one-third of counties have only one Obamacare insurer according to the Kaiser Foundation. Kaiser also estimated that without the subsidies, average premiums for the Obamacare silver plan would rise by 19 percent.
The failure of their health care reform bill has left the Republicans between a rock and a hard place. On one hand, disagreement between rival Republican factions makes repealing large parts of Obamacare and reforming the remainder impossible. On the other hand, if the GOP does nothing and Obamacare implodes with prices spiraling out of control, President Trump and Republican leadership would likely bear the brunt of the public displeasure.
The Trump Administration seems to have decided that the least bad option is keep the Affordable Care Act on life support for the time being. Continuing the subsidies will not be popular with the Republican base, but it might buy the president and congressional leaders time to iron out differences between the Freedom Caucus and moderates for a second attempt at reform.
Ironically, the subsidies were the subject of a lawsuit filed by House Republicans against the Obama Administration. The GOP won the case on the grounds that Congress had authorized the subsidies, but had never appropriated funds for them.
“Congress is the only source for such an appropriation, and no public money can be spent without one,” wrote US District Judge Rosemary Collyer in her decision. Ultimately the ruling against the president was stayed pending appeal, allowing the unappropriated subsidies to continue.
At least two Republican leaders say that Congress should appropriate the money. “I don’t think anybody wants to disrupt the markets more than they already are,” Rep. Tom Cole, chairman of the Appropriations subcommittee responsible for health spending told the Times. “It’s a very unstable market.”
“I will do everything I can to make sure that the cost-sharing reduction payments get made,” Rep. Greg Walden (R-Oreg.), chairman of the Energy and Commerce Committee said. Walden said the subsidies are “an obligation we have not only to the insurers,” but also to consumers, and “we cannot leave them high and dry.”
A bill appropriating money for the subsidies might make unlikely bedfellows. Moderate Republicans and those who don’t want to see upheaval in the health insurance industry might find themselves voting with Democrats to preserve the Obamacare subsidy … if only for a little while.
If the appeal continues, the Trump Administration can make the payments without an appropriation from Congress for the time being. This puts the Trump Administration in the awkward position of defending an Obama-era end run around Congress in federal court against House Republicans.
The critical nature of the subsidies on making Obamacare’s health care marketplaces work illustrates a fundamental flaw in the Affordable Care Act. The ACA did nothing to reduce the cost of health care or health insurance, it merely changed who pays. Obamacare shifted the burden of paying the bills from consumers and health insurance companies to the taxpayers. Without government subsidies paid for by taxpayers, the whole house of cards will fall.