Trump must dump the unconstitutional health insurance industry bailouts from Obamacare – Pacific Research Institute

Trump must dump the unconstitutional health insurance industry bailouts from Obamacare


On August 17, the Trump administration announced it would dole out “cost-sharing reduction” subsidies to insurers on Obamacare’s exchanges for at least another month.

The decision comes despite President Trump’s repeated threats to withhold the money, which he has correctly called a “bailout” for the insurance industry.

Obamacare orders insurers to reduce deductibles and co-payments for enrollees in mid-level “silver” plans who earn between 138 and 250 percent of the federal poverty level. The law intended to reimburse insurers for these cost-sharing reduction expenses, which this year amount to roughly $7 billion.

But Congress never appropriated the money to fund the CSR program. The Obama administration ignored that inconvenient truth and funneled the money to insurers anyway.

In 2014, the House of Representatives sued, arguing that it is unconstitutional for the executive branch to spend money Congress hasn’t appropriated. Judge Rosemary Collyer of the U.S. District Court for the District of Columbia agreed in a May 2016 ruling. But she allowed the payments to continue pending appeal.

Several insurers have threatened to withdraw from the exchanges, or jack up premiums substantially, if the subsidy program ends. Either outcome could bring down the exchanges.

But a new Congressional Budget Office report suggests that won’t happen. The CBO predicts that ending the CSRs would indeed cause insurers to hike premiums. Silver plans sold through the exchanges would cost 20 percent more in 2018 and 25 percent more in 2020.

But as health policy analyst Chris Jacobs has noted, low-income enrollees would be shielded from these hikes by their existing income-based tax credits, which increase with the cost of plans.

People who buy plans off the exchanges already aren’t eligible for CSRs. So their premiums would be unaffected. Some insurers would temporarily leave the exchanges, but the CBO believes they’d return by 2020.

The only ones who would permanently suffer from ending the CSR program would be taxpayers. The increased subsidies would boost the federal deficit by $194 billion over a decade.

Higher deficits aren’t desirable. But they’re no reason to defy the Constitution. It’s time for the administration to stand up for the rule of law and end the CSR bailouts.

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Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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