A few months ago, we called those increased prices an uncertainty tax. The uncertainty is gone now. But the conservative planning of the insurance industry means that many insurers can afford to keep offering insurance, even after the president cuts off the funding. Plans that priced for the threat will take a small haircut this year, but they can still make money, even without the payments, next year.
The Congressional Budget Office offered an estimate about what would happen if the president stopped making the payments, and it’s instructive. It estimated that, in the short term, the decision would cause instability: One million additional people would become uninsured in 2018, prices for insurance would rise by 20 to 25 percent, and insurers would drop out of some parts of the country.
But, in the long run, the budget office thought that health plans and state insurance regulators would hack their way around the problem, resulting in an uninsured rate that would be even lower than it is under current law. The catch: It would end up costing the government more money in subsidies that help lower-income people pay their premiums, about $6 billion this year and $26 billion by the end of a decade.
Some of that hacking has begun. In California, insurers have been instructed to impose a surcharge on just one type of plan to cover their lost subsidy payments. That arrangement means that some customers will pay a higher price, but no insurance company will lose its shirt.
In other states, things are more unsettled, because insurers and regulators didn’t price ahead. In those places, the consequences of the president’s decision will be felt unevenly, with some state markets proceeding as planned, and others making last-minute exits or other adjustments. Insurers have already signed final contracts with the government for next year, though they have an out if the subsidies go unpaid.
Congress can also act. The president is able to eliminate the subsidies because of the ambiguity in the language of the health law. If lawmakers vote that the subsidies should be paid, either for the coming year or indefinitely, the president will need to begin paying them again. Bipartisan negotiations in the Senate committee on Health, Education, Labor and Pensions this summer had focused on just such legislation, though they got derailed in a recent effort to pass a Republican bill to replace parts of Obamacare with block grants.
The bipartisan talks could resume, though passage of cost-sharing payments would require Republican support, and many G.O.P. lawmakers view them, as the president does, as a “bailout of insurance companies.” An unusually broad alliance of interests has urged Congress to appropriate the money, signaling just how disruptive their loss could be. A letter drafted in September was signed not just by health insurers, doctors, and hospitals, but also by the Chamber of Commerce.
Eliminating cost-sharing subsidies is not the only thing the president did Thursday, however. He also signed an executive order devised to help more customers exit Obamacare’s markets in search of less regulated insurance options. And Thursday’s actions follow a string of smaller policy choices that are likely to reduce Obamacare sign-ups. (My colleague Haeyoun Park has been keeping a helpful list of them here.) Taken together, the actions send a strong signal to insurance companies about the administration’s approach to the future of the Obamacare marketplaces. That message may prove as powerful as any strict loss calculation.
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