End of Obamacare subsidies could lead to free insurance for some, at a price for taxpayers

"If President Donald Trump prevails in shutting down a major Obamacare health insurance subsidy, it would have the unintended consequence of making free basic coverage available to more people, and making upper-tier plans more affordable," Ricardo Alonso-Zaldivar reports for The Associated Press. It means an aggregate increase in federal spending on health care though.

Sens. Patty Murray and Lamar Alexander (AP photo: Susan Walsh)

Policy experts say killing the subsidies that reimburse insurers for discounts would cause an increase in tax credits for plans covering people with low-to-moderate incomes.

How does that work? "If the subsidy for copays and deductibles gets erased, insurers would raise premiums to recoup the money, since by law they have to keep offering reduced copays and deductibles to consumers with modest incomes," Alonso-Zaldivar reports. "The subsidy for premiums is designed to increase with the rising price of insurance. So government spending to subsidize premiums would jump."

In practical terms, "It means many more Californians and people across the country will get a zero-premium bronze plan," Peter Lee told Alonso-Zaldivar. Lee is the executive director of the state health insurance marketplace Covered California. Bronze plans are the most basic plans on the marketplace. "Other states where consumers could see zero-premium bronze plans include Florida, Georgia, Illinois, Mississippi, Pennsylvania, Utah and Wyoming, according to an industry estimate," Alonso-Zaldivar reports.

But the death of the cost-sharing subsidies is by no means a done deal. Republican Sen. Lamar Alexander of Tennessee and Democratic Senator Patty Murray of Washington announced a proposal to save the subsidies, backed by 12 Democrat and 12 Republican co-sponsors. "The short-term deal would extend CSR payments for the next two years and would eliminate the question about whether paying them is legal. The agreement would permanently amend Obamacare to give new flexibility for states to create insurance policies that have a larger variety and lower costs and it also would continue CSRs during 2018 and 2019," CBS News reports. Trump has been ambivalent about supporting the measure.

Also, the attorneys general from 19 states filed a federal lawsuit saying that the Trump administration is legally obligated to pay the cost-sharing subsidies, Maria Castellucci reports for Modern Healthcare.