Trump’s Latest Attempt to Gut Obamacare Could Backfire Spectacularly

Ian Millhiser

Ian Millhiser Senior Constitutional Policy Analyst, Think Progress

As soon as this week, according to Donald Trump adviser Kellyanne Conway, Trump intends to decide whether to cut off payments intended to stabilize insurance markets and make health care affordable for many Americans with modest incomes.

Trump apparently believes that cutting off these payments will help “implode” Obamacare. Yet, if Trump should stop the payments, that could have the unintended effect of expanding access to health insurance, even potentially making some health plans free for many families of modest means.

The reason why involves a fairly complicated formula governing how most Obamacare exchange customers pay for their health plans, and Trump’s apparent unfamiliarity with how that formula operates.

A tale of two subsidies

Most health plans sold in the Affordable Care Act’s exchanges are classified as “Bronze,” “Silver,” “Gold,” or “Platinum” plans, depending on how much coverage they offer participants. Individuals who earn below a certain income level receive a tax credit to help them pay their insurance premiums. The size of this subsidy is tied to the second-cheapest silver plan available in a particular market.

Thus, as the cost of purchasing a silver plan increases, so too does the amount the government pitches in to help people pay for their insurance.

Absent an act of Congress, Trump cannot cut off these tax credits. A 2016 court decision, however, potentially gives Trump the ability to cut off a different set of Affordable Care Act subsidies (though there may be another legal path that would allow insurers to effectively turn these subsidies back on).

These subsidies, known as Cost Sharing Reductions (CSR), compensate insurers for complying with one of their obligations. Under Obamacare, insurers must reduce deductibles, co-payments, and similar expenses paid by some of their consumers in the Affordable Care Act exchanges. The federal government then reimburses the insurer for doing so through CSR payments.

So, if Trump cuts off CSR payments, he will blow a hole in many insurers’ budgets. The insurers, meanwhile, will likely compensate for this lost income by jacking up premiums — and that’s where things start to get interesting and unpredictable.

Free health plans!

As actuaries Dianna Welch and Kurt Giesa note in an analysis of what would happen if the CSR payments are cut off, “CSR are only available under silver-level exchange plans.” Thus, if Trump does cut off these payments, it is likely that premiums for bronze, gold, and platinum health plans would remain fairly constant. After all, shutting down CSR payments has no immediate impact on the cost of insuring a bronze, gold, or platinum health consumer.

Now here’s the part where things get weird. Recall that the value of the tax credits paid out to help people afford their premiums are tied to the cost of the second-least expensive silver plan — so those tax credits gain value as silver-level premiums rise.

So even as premiums in the bronze, gold, and platinum markets stay more or less the same, the amount the government will pay to help cover those premiums will spike in a world without CSR. The result, according to Welch and Giesa, is that many people will be able to obtain bronze plans for no cost at all — or, alternatively, they will be able to purchase much more generous gold plans for barely more than the cost of a silver plan.

It should be noted that the actual impact of cutting off CSR payments will vary from market to market, and it will also vary depending on the age and income levels of individual consumers. In Detroit, Welch and Giesa predicit that a 60 year-old earning up to 250% of the federal poverty rate (just over $40,000 for a married couple living alone) will be able to receive a bronze plan for free. Alternatively, they can opt for a gold plan at much the same cost as a silver plan.

 

CREDIT: Oliver Wyman Actuarial Consulting

In Phoenix, meanwhile, a 60 year-old earning as much as 300 percent of the poverty rate (or about $48,000 for the same unmarried couple) could receive a bronze plan for free. Gold plans, however, would remain significantly more expensive than bronze plans.

 

CREDIT: Oliver Wyman Actuarial Consulting

Even with the CSR payments intact, the Affordable Care act does make trade offs. It tends to leave people with relatively modest incomes better off, for example, and some people with higher incomes somewhat worse off. Cutting off CSR payments would likely exaggerate many of these trade offs, saddling relatively affluent individuals with much higher premiums and potentially giving a windfall to many people with much lower incomes.

In attempting to undercut a major segment of America’s safety net, in other words, Trump could wind up transferring wealth downward.

Ian Millhiser is a Senior Constitutional Policy Analyst at the Center for American Progress Action Fund and the Editor of ThinkProgress Justice. He received a B.A. in Philosophy from Kenyon College and a J.D., magna cum laude, from Duke University. Ian clerked for Judge Eric L. Clay of the United States Court of Appeals for the Sixth Circuit, and has worked as an attorney with the National Senior Citizens Law Center’s Federal Rights Project, as Assistant Director for Communications with the American Constitution Society, and as a Teach For America teacher in the Mississippi Delta. His writings have appeared in a diversity of legal and mainstream publications, including the New York Times, The Los Angeles Times, U.S. News and World Report, Slate, the Guardian, the American Prospect, the Yale Law and Policy Review and the Duke Law Journal; and he has been a guest on CNN, MSNBC, Al Jazeera English, Fox News and many radio shows.

Posted In: Allied Approaches

Union Matters

The Big Drip

From the USW

From tumbledown bridges to decrepit roads and failing water systems, crumbling infrastructure undermines America’s safety and prosperity. In coming weeks, Union Matters will delve into this neglect and the urgent need for a rebuilding campaign that creates jobs, fuels economic growth and revitalizes communities. 

A rash of water main breaks in West Berkeley, Calif., and neighboring cities last month flooded streets and left at least 300 residents without water. Routine pressure adjustments in response to water demand likely caused more than a dozen pipes, some made of clay and more than 100 years old, to rupture.

West Berkeley’s brittle mains are not unique. Decades of neglect left aging pipes susceptible to breaks in communities across the U.S., wasting two trillion gallons of treated water each year as these systems near collapse.

Comprehensive upgrades to the nation’s crumbling water systems would stanch the flow and ensure all Americans have reliable access to clean water.

Nationwide, water main breaks increased 27 percent between 2012 and 2018, according to a Utah State University study.  

These breaks not only lead to service disruptions  but also flood out roads, topple trees and cause illness when drinking water becomes contaminated with bacteria.

The American Water Works Association estimated it will cost at least $1 trillion over the next 25 years to upgrade and expand water infrastructure.

Some local water utilities raised their rates to pay for system improvements, but that just hurts poor consumers who can’t pay the higher bills.

And while Congress allocates money for loans that utilities can use to fix portions of their deteriorating systems, that’s merely a drop in the bucket—a fraction of what agencies need for lasting improvements.

America can no longer afford a piecemeal approach to a systemic nationwide crisis. A major, sustained federal commitment to fixing aging pipes and treatment plants would create millions of construction-related jobs while ensuring all Americans have safe, affordable drinking water.

More ...

There is Dignity in All Work

There is Dignity in All Work