Cutting ACA Subsidies Would Hike Premiums by 20 Percent, CBO says
A new Congressional Budget Office (CBO) report estimates a 20 percent increase in health insurance premiums for low income individuals who purchase insurance through an exchange should the Trump Administration end the cost-sharing reduction (CSR) subsidies. The CBO report, projecting the effects of ending these ACA payments, comes after months of President Trump threatening to end the CSR payments to insurers. The Administration has made the payments for August and is currently deciding whether make them again in September.
Highlighted findings from CBO’s report include:
- Impact on premiums – CBO estimates that gross premiums would be 20 percent higher in 2018 and 25 percent higher by 2020. The increases would occur, CBO says, “because most state insurance commissioners would eventually allow insurers to compensate for the termination of CSR payments by raising premiums substantially for silver plans offered through the marketplaces.” However, the cost to consumers would stay the same or even decline.
- Impact on the Federal deficit – CBO says the $194 billion increase in the deficit from 2017 through 2026 results from the fact that the federal government would end up subsidizing the increased premiums discussed above through premium tax credits (PTC). As premiums rise, more people who buy insurance on the exchange would qualify for larger premium tax credits. CBO estimates that more people would buy individual market insurance overall due to lower net premiums.
- Impact on the number of uninsured – The number of people uninsured would be slightly higher in 2018 but slightly lower starting in 2020. CBO says that the effects on coverage stem from increases in the PTC which “would make purchasing nongroup insurance more attractive for some people.”
- Impact on market stability – CBO estimates that if the CSR payments were pulled, “the nongroup insurance market would also continue to be stable in most areas of the country” because PTCs “combined with the individual mandate would maintain sufficient demand for insurance by people with low health care expenditures.” However, CBO estimates that in 2018 about 5 percent of people will live in areas that would have no insurers, but that any uncertainty leading insurers to withdraw from the individual market would be temporary.