WASHINGTON (CN) – The Trump administration’s pledge to end billions in federal insurance subsidies will worsen the federal deficit, and spike health insurance premiums, the Congressional Budget Office warned Tuesday.
The nonpartisan CBO scored the policy option at the request of House Democratic leadership, releasing its results just weeks after the Senate failed to deliver on a seven-year campaign promise to repeal and replace the federal health care law.
At issue are the subsidies by which the government reimburses insurers for the cost of offering more affordable health care plans to middle- and low-income Americans. Those plans have cost-sharing provisions, including reduced deductibles, co-payments and out-of-pocket expenses.
The subsidies are estimated to cost $7 billion for 2017, but the CBO found that ending the subsidies, which President Donald Trump has threatened to do by 2018, would drive up the federal deficit by an estimated $194 billion through 2026.
Without the cost-sharing reductions, or CSRs, insurers would no longer qualify to sell plans in the Patient Protection and Affordable Care Act markets without finding other ways to cover their costs.
“Because they would still be required to bear the costs of CSRs even without payments from the government,” the CBO report states, “participating insurers would raise premiums of ‘silver’ plans to cover the costs.”
Silver plans are a midlevel option under the Affordable Care Act. The CBO found that cutting the subsidies could drive up silver-plan insurance premiums by 20 percent in 2018 and up to 25 percent by 2020.
Attempts to repeal and replace the Affordable Care Act, along with repeated threats from the Trump administration to end the cost-sharing subsidies, have left insurers with uncertainty about the future of the health care law.
The payments have long been an issue, particularly for House Republicans who sued the Obama administration over them, casting the payments as unlawful. A federal judge in Washington ruled in favor of the Republicans, but the Obama administration appealed the decision.
The Trump administration, which took over the lawsuit, has waffled about whether it will end the subsidies or continue the appeal. So far it has paid the subsidies on a month-to-month basis.
Should the administration move forward with the proposed policy, the CBO estimates that some insurers will leave the non-group markets, which in turn will leave an estimated 5 percent of Americans living in areas without an insurer by next year.
This would not be severe enough, however, to cause the markets to collapse, the CBO found. In fact, it said the markets would stabilize by 2020, when insurers would return and most people would be able to buy plans again.
While the CBO predicts that 1 million Americans would lose insurance in the short term, it says there could be 1 million fewer Americans uninsured by 2020.
Many people would be insulated from the rising premiums, according to the CBO report, because federal tax subsidies, which will cost the government, would automatically rise alongside premiums.
“Because the tax credits would increase when premiums for silver plans rose, the agencies estimate that the average subsidy per person receiving premium tax credits to purchase nongroup health insurance would increase,” the CBO report states.
The CBO cautioned that its analysis depends on how various parties would respond to an end in the cost-sharing subsidies.
“Such estimates are inherently imprecise because the ways in which federal agencies, states, insurers, employers, individuals, doctors, hospitals and other affected parties would respond to the changes made by this policy are all difficult to predict,” the CBO report states.