President Trump threatens to cut Obamacare subsidies

President Donald Trump has not given up on the holy grail of repealing Obamacare, and on Wednesday he revealed his next move, threatening to use health insurance subsidies as a weapon to get Democrats to negotiate on reform.

Trump said his administration may not have the legal authority to make cost-sharing reduction payments, in an interview with the Wall Street Journal. So-called CSR subsidies reduce out-of-pocket costs for low-income Affordable Care Act enrollees, but Republicans in Congress sued the Obama administration, saying they expenditures were not authorized under the ACA.

Trump told the Journal he did not want people to get hurt by stopping the payments, but that what he thinks “should happen… is the Democrats will start calling me and negotiating.”

Democrats cried foul at the president’s apparent hardball tactic.

“President Trump is threatening to hold hostage health care for millions of Americans, many of whom voted for him,” said Senate minority leader Charles Schumer in a statement. “This cynical strategy will fail.”

“Refusing to make the Cost Sharing Reduction payments has no purpose but to hurt millions of people, and manufacture a crisis,” House Democratic leader Nancy Pelosi said in a statement.

Earlier in the day, hospital, physician and insurance industry groups sent a letter urging the president and congressional leaders to maintain the subsidies for this year and next, calling it the most “critical action” to stabilize the individual market.

“Analysts estimate that loss of CSR funding alone would increase premiums for all consumers — both on and off the exchange — by at least 15 percent,” the group said in the letter, adding, “Hardworking taxpayers will pay more, as premiums grow and tax credits for low-income families increase, than if CSRs are funded.”

The renewed uncertainty over CSRs comes at a key moment for insurers. Initial 2018 rate submissions are due in Kentucky, Ohio and Virginia in the week after Easter.

“If I were a carrier right now, I guess I would be thinking about… two sets of rates. If I were only allowed to submit one set of rates, I guess I would submit the most conservative one,” said Katherine Hempstead, a senior advisor at the Robert Wood Johnson Foundation.

In the spring of 2015, some states allowed insurers to submit two sets of rates, when the Supreme Court was deciding the legality of Obamacare tax credits in the King v. Burwell case. So far this spring, while the Trump administration has delayed the federal deadline for rates on healthcare.gov until June, individual states have not indicated whether they’ll allow contingency bidding.

“I fell like people will try to serve (the individual) market … but the question is what part of the market do carriers think they have the best chance of serving, depending on how much public money there’s going to be in the market,” said Hempstead.

Already, Aetna and Blue Cross insurer Wellmark pulled out of the Iowa market for 2018, in part because of regulatory uncertainty. Political infighting over CSRs could push others to sit out next year.

“Individual market stability in 2018 depends on getting clarity on whether the administration will continue paying cost-sharing subsidies, without which insurers would likely exit or institute large premium hikes,” wrote analyst Michael Newshel of Evercore ISI in a note to clients.

The president is clearly aware of the impact it would have to stop making CSR payments. After urging congressional leaders to pull the vote on the GOP health reform bill last month, Trump exclaimed that the best thing for Republicans is to “let Obamacare explode.”

Now, the question is whether he’s really willing to let it happen if he can’t convince Democrats to negotiate.

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