Trump Hints at Withholding Exchange Subsidies to Prompt ACA’s Decline

Following the House of Representatives’ failed effort to repeal the Affordable Care Act, President Trump has promised that the repealing and replacing law is still one of his top priorities, and also hinted at hastening its demise by withholding the premium subsidies the government pays to health exchanges.

Essentially, if he follows through and creates the regulatory environment to make withholding the subsidies possible, the health care exchanges would collapse under their own weight as insurers pull out en masse.

In addition, already it’s unclear how serious the IRS under Trump will be about collecting penalties from applicable large employers who are required under the ACA to cover their full-time workers.

The President made the announcement on Fox Business, saying that the health insurance bill will get done because it is essential for freeing up money to fund his second target: tax reform.

What Trump said during his interview on Fox was that the marketplaces would fail if the government didn’t continue making payments to insurers that participate in the exchanges. Subsidies are paid to the health exchanges to help lower-income individuals and families purchase coverage on them.

The subsidies – totaling about $7 billion a year – are also the subject of a lawsuit that challenges their validity. House Republicans sued to block the payments in 2014.

A judge sided with the Republicans in a decision nearly a year ago, but did not enforce the decision while the Obama administration appealed. The appeal is still underway, and if it wanted to do so, the Trump administration could drop the appeal and stop making the payments.

That would spell the end of the ACA really in terms of the individual mandate, but doing so could send severe shockwaves through the entire health insurance system with a number of unforeseen consequences.

Fox has forecast that their elimination would lead to an immediate 19% increase in premiums on exchanges if insurers were to stick around.

After the ACA replacement – the American Health Care Act – failed, Republican leaders in Congress said they would support continuing the subsidies. Shortly thereafter, the Trump administration said that payments would continue while the lawsuit is being litigated.

As stated above, it’s unclear also whether the administration will continue enforcing the employer mandate by not collecting penalties from applicable large employers that are required to cover their workers.