Is President Trump is doing away with health insurance subsidies for low-income people?
What President Trump’s Executive Order on Health Insurance Subsidies Means, and Doesn’t
You may have read that President Trump is doing away with health insurance subsidies for low-income people under the Affordable Care Act (the ACA or Obamacare). Phrased as starkly as that, the statement can be misleading.
Let’s look at how subsidies work under the Obamacare law, what the president’s executive order actually changes, and what it may mean for health insurance shoppers this coming open enrollment period.
How Obamacare subsidies work
Under the Obamacare law, health insurance subsidies officially known as “advanced premium tax credits” are made available to people earning up to 400 percent of the federal poverty level. That’s about $48,000 for a single person or $98,000 for a family of four.
Most of the time, when someone refers to Obamacare subsidies, these are the subsidies they’re talking about. These subsidies are designed to help recipients cover the cost of their monthly premiums so that they can afford to buy health insurance.
But there’s a second kind of subsidy under Obamacare. These subsidies (which are officially known as cost-sharing reductions or CSRs) are different from the first in two ways.
First, they’re only available to people earning up to 250 percent of the federal poverty level (about $30,000 for a single person). And second, they don’t help with monthly premiums but lower the annual deductibles that recipients would otherwise have to pay when they receive covered medical care.
What President Trump’s executive order actually does
President Trump’s executive order signed on October 12, 2017 does away with the second kind of subsidy (CSR subsidies) but leaves the first kind of subsidies (advanced premium tax credits) intact.
As a result of the executive order, the federal government will halt subsidy payments to insurance companies to help cover the cost of annual deductibles for people earning 250 percent of the federal poverty level or less.
Government payments to help qualifying persons cover their monthly health insurance premiums will continue as before.
What does this all mean for health insurance shoppers today?
The nationwide health insurance open enrollment period for 2018 is scheduled to begin on November 1, 2017 and it’s only natural that health insurance shoppers will have questions about subsidies.
The good news for people earning no more than 400 percent of the federal poverty level is that subsidies that help them cover their monthly premiums will continue to be available as usual.
It’s less clear precisely what the cessation of CSR subsidies will mean for 2018 health insurance shoppers. It seems likely to result in increased monthly premiums as health insurance companies try to balance out costs without government help.
Increased premiums sounds like a bad thing, of course. And it may indeed be a bad thing for middle-income folks who don’t get government help with their monthly premiums. (In many cases, if Obamacare-compliant coverage becomes too costly for you, eHealth can help match you with a medical insurance package for protection against unforeseen medical costs.)
However, for people earning 400 percent of the federal poverty level or less, the other kind of subsidies will likely come to the rescue. Because of the way these subsidies are designed, they increase in value as the cost of premiums increases. So, people who lose government help covering their deductibles may effectively end up with more government help covering premiums for lower-deductible plans.