The White House still hasn't made up its mind about crucial Obamacare subsidies

The White House Wants Everyone to Keep Guessing Whether It Will Nuke Obamacare

The White House Wants Everyone to Keep Guessing Whether It Will Nuke Obamacare

A blog about business and economics.
May 22 2017 1:20 PM

The White House Wants Everyone to Keep Guessing Whether It Will Nuke Obamacare

Lips. Sealed.

Photo by Michael Reynolds-Pool/Getty Images

The White House was expected to deliver a final decision Monday about whether it would continue to defend a lawsuit that could determine the fate of Obamacare's coverage markets. But Politico reports that it will instead ask the court for an additional three months to make up its mind—a delay that will leave insurers grappling with further financial uncertainty as they determine rates for next year, almost certainly leading to higher premiums for their customers.

The suit, which was first filed by House Republicans against the Obama administration, challenges the government's ability to continue sending crucial subsidies to insurers to compensate them for limiting the out-of-pocket costs they charge low-income enrollees. A federal trial judge previously sided with the GOP members, ruling that Congress had never properly appropriated funding for the so-called cost-sharing reduction payments, and the case is currently on appeal. Trump himself has threatened to abandon the case and cut off the CSRs, which most experts believe would amount to dropping a bomb on Obamacare's insurance exchanges. Because insurers are still required by law to keep costs down for poorer enrollees, the industry would face severe financial losses without the subsidy payments, which are predicted be worth $7 billion this year. Many carriers would likely abandon the individual market, while those that remained would have to raise their premiums significantly.  


By simply leaving the fate of the CSRs in limbo, Trump is pretty much ensuring Americans will pay more for their health coverage next year. Insurers have begun submitting their rate requests to state regulators for 2018, and uncertainty over the president's decision has already caused some companies to ask for major rate hikes this year just in case the subsidies are eventually cut off. Allowing this issue to linger for another three months will force pretty much every coverage provider to set its prices without knowing whether the subsidies will last, which will force them to charge more. This move probably won't cause an immediate crisis for the insurance markets, but it will continue to undermine them, as higher premiums will likely drive away more customers. Some carriers may also choose to bail rather than deal with the guessing game. Here's how the Kasier Family Foundation researcher Cynthia Cox summed up the situation for me:

If the stay continues, then insurers will continue to face a great deal of uncertainty for next year. This could cause some insurers to drop out of the market and others to raise premiums substantially since they won’t know whether they will get these payments by the time they have to file their premiums for next year. This uncertainty will likely mean less choice of insurers or possibly some parts of the country with no choice of insurers on the exchanges. We also suspect that insurers will have to raise their rates so much that premium tax credits will also increase substantially, meaning it will cost tax payers more than if the government had made these payments.

This might all suit the administration's political purposes better than dropping the appeal entirely. Simply cutting off the CSRs would be an overt move that would trigger a wave of media attention, with lots of cable news headlines about Trump choosing the nuclear option on health care. Delaying the issue will instead subtly sabotage the exchanges without capsizing them outright—which will make it easier for Trump to suggest that Obamacare is failing on its own and must be replaced. The president is doing plenty of damage by doing nothing.

Jordan Weissmann is Slate’s senior business and economics correspondent.