With Obamacare Subsidy Cut, Trump Will Raise Insurance Premiums, Reduce Coverage

Posted Oct. 18, 2017

MP3 Interview with Eagan Kemp, health care policy advocate with Public Citizen, conducted by Scott Harris


After several major attempts to repeal the Affordable Care Act, commonly known as Obamacare, President Trump issued two executive orders on Oct. 12 with the stated goal of dismantling his predecessor’s landmark healthcare legislative achievement. The first executive order asks the Labor Department to loosen rules that permit small companies to form associations and buy the kind of coverage available to larger businesses. These plans would have lower standards and cover far fewer healthcare costs. The second executive order ends $9 billion in subsidies paid under the Obamacare program to reduce the cost of health insurance for low-income Americans. Ironically, nearly 70 percent of those benefiting from subsidies cut by the president live in states Trump won in the 2016 presidential election.

Taken together, Trump’s two executive orders will result in an increase in the number of Americans without health insurance, the erosion of health insurance standards, substantial increases in insurance premiums, market instability and increased expenses for the federal government. The day after the executive orders were issued, 18 U.S. states sued the president to stop him from ending the payment of Obamacare subsidies.

Meanwhile, Sen. Lamar Alexander, R-Tennessee, and Sen. Patty Murray, D-Washington, agreed in principle on a bill that would cover the subsidy payments for two years, but the fate of that legislation is uncertain at best. Between The Lines’ Scott Harris spoke with Eagan Kemp, health care policy advocate with Public Citizen and a former senior policy analyst at the U.S. Government Accountability Office. Here, he examines the impact of President Trump's recent executive orders on the U.S. health care system.

EAGAN KEMP: Millions of Americans will experience either higher premiums or they may be scared away from getting coverage because there's going to be some sticker shock even if their premiums might cover some of the cost changes.

BETWEEN THE LINES: Do we have an estimate of how many people could lose their health insurance over the course of the next year once these specific subsidies disappear?

EAGAN KEMP: We don't have an exact estimate but there's a potential of millions of folks losing their coverage. The other that Trump had said that he was hoping that this was do was to save money, but that we also know that's not the case based on estimates from the Congressional Budget Office. Ultimately, even though they're cutting these subsidies, it will cost the federal government nearly $200 billion over the next decade because the insurance companies are now going to need to charge higher premiums, but because of the way the law is structured, those increases will be covered by the federal government.

There will be around 1.5 to 2 million folks that are going to see direct increases that won't be covered by the subsidies that they're getting.

BETWEEN THE LINES: Now how about the association health plans. What kind of impact does the Trump executive order on the association health plans have on the overall insurance market?

EAGAN KEMP: That one's pretty significant as well, and the implications there could be far-ranging. And the implications there could be far-ranging. So this particular executive order, it directs certain parts of the federal government to make new rules or regulations. And what's scaring people is that the way it could be written it could allow companies to sell across state lines and so, something that we experienced before the Affordable Care Act was a race to the bottom in terms of insurance standards.

So there were companies offering junk plans that could be sold across state lines and that's sort of the fear that it could go back to that. So things that often weren't covered previously were maternity care, or mental health services or severe limitations on prescription drugs. And the real fear is that folks could end up thinking that they're less, but what they're paying for is a junk plan that won't cover them when they get sick.

BETWEEN THE LINES: What are the wider societal ripple effects from having these plans that don't really cover what they cover currently because of the ACA standards?

EAGAN KEMP: One of the benefits of the Affordable Care Act is a reduction in the amount of debt Americans are taking on due to medical expenses. Folks are able to get coverage earlier. They're able to maintain coverage without the proper regulation, someone could think that they're signing up for something good, and then once they get sick realize that they have to bear all that expense, which may mean taking on medical debt. It may mean declaring bankruptcy.

BETWEEN THE LINES: As I've been reading about these changes, one of the warnings that has been written about by a lot of commentators in those inside the health insurance industry, is a general concern about what they call destabilization of the health insurance marketplace – which means you might have more health insurance companies pulling out of the Obamacare exchanges. But the effects could go further than that, I've been reading. Tell us what your concerns are about the stability of the marketplace.

EAGAN KEMP: Some states they had their insurance companies provide two sets of rate increases. And so some states, insurers said, "We expect to raise it 8 to 10 percent" and then if the state asked them for the second set, it might have been 20 to 30 percent. And that's a big difference. And all of a sudden, if you're an insurer you're about to start opening your market and start recruiting folks, so now you're having to have these much higher premiums. So anyone looking on any sort of state exchange or federal exchange, they're seeing some really high prices and they might step away. And if there's less folks enrolling, that means that the folks that are left who may be sicker, are going to be facing even high premiums over time. And that's one of the real concerns about sort of the destabilization – you'd have insurance companies with these junk plans cherry-picking the healthy people out of the market, which are just going to leave sick folks in the actual ACA-regulated plans, meaning they're going to be paying outrageous sums and just may not be solvent. An insurance company can't only be insuring the sickest folks.

BETWEEN THE LINES: Eagan, what do we know about public opinion on Obamacare, whether to repeal, replace this kind of direct sabotage that we see from the White House? Do know how Americans, by and large, feel Congress and the White House should be moving in terms of improving the health care system of the country?

EAGAN KEMP: One thing we're seeing is that throughout the repeal and replace efforts, the Affordable Care Act has only gotten more popular. We're seeing the majority of Americans of approving of what the Affordable Care Act does and wanting it to get continued. It's a very small amount of Americans that want it repealed or repealed and replaced. Americans are realizing the importance that the Affordable Care Act has meant for them. And I think that's only going to continue, especially if Americans continue to see higher premiums and polling also indicates that Trump doesn't think he's going to get blamed for this – he's said that again and again that – but the polls don't say that. The polls indicate that the Congress and Trump will be held accountable for the sabotage.

For more information, visit Public Citizen at Citizen.org.

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