By canceling Affordable Care Act subsidies for low-income Americans this week, President Donald Trump might be undermining the health law known as Obamacare in some states.
But in Florida, the president’s executive order would lead to a financial windfall for Obamacare insurers and better coverage options for many of the 1.4 million Floridians with an ACA plan, health policy experts say.
What’s more, the number of Floridians without health insurance is likely to remain unchanged and might even drop slightly as a result of the subsidies being canceled, according to estimates from the Congressional Budget Office and the nonprofit Urban Institute.
Those might be unintended consequences of the executive order, but as President Trump has said: “Nobody knew that healthcare could be so complicated.”
The effects of the president’s executive order this week concerning health coverage — including the sale of health insurance across state lines, and the creation of association health plans — are uncertain, and much will depend on how policies are implemented.
In addition, a lack of clarity on the Trump administration’s enforcement of the individual mandate to buy health insurance, a shorter open-enrollment period than prior years, and cuts to outreach and in-person enrollment counselors all could reduce coverage and destabilize the ACA exchange.
But the Urban Institute reports that Florida stands to gain from the canceling of an Obamacare subsidy, called cost sharing reduction, which reduces out-of-pocket costs such as deductibles and co-payments for low-income Americans. The health law also provides a second subsidy that reduces the monthly premium for low- and middle-income consumers.
For eligible consumers, cost sharing reduction subsidies lower the out-of-pocket maximum — the total amount they pay for covered medical services per year. When they reach their out-of-pocket maximum, consumers’ insurance plans pay for 100 percent of covered services.
This summer, as political uncertainty plagued the national healthcare debate, Florida’s Office of Insurance Regulation told Obamacare insurers to price their 2018 coverage assuming the Trump administration would stop paying the cost-sharing subsidies.
To make up for the loss, Obamacare insurers in Florida raised premiums by 45 percent on average for next year. Most of the rate hike came from standard plans sold on the ACA exchange at healthcare.gov because those are the only plans that provide cost-sharing subsidies, which are available to consumers who earn less than two-and-a-half times the poverty level — or $30,000 for an individual and $51,000 for a family of three in 2017.
Here’s where it gets complicated: Those standard plans are also the benchmark the federal government uses to calculate the second Obamacare subsidy that reduces monthly premiums for consumers earning up to four times the federal poverty level.
When the premium for the benchmark plan rises, so does the government’s subsidy for eligible consumers — because the health law ensures that those consumers will never spend more than 9.5 percent of their income on premiums.
So the federal government raises premium subsidies not only for consumers who are eligible for cost sharing reductions — it raises subsidies for all consumers earning up to four times the federal poverty level.
As a result, said Linda Blumberg, author of the Urban Institute report on cost sharing reductions, “The federal government will end up spending more money in Florida than it would have.”
She predicts that federal spending on Obamacare premium subsidies in Florida will rise to $7.2 billion in 2018 — about 11 percent more than the $6.5 billion the government would have spent on premium subsidies and cost-sharing reductions combined.
Blumberg called the change irresponsible: “Why would you make a change that, at least in some states, is going to end up leaving you where you were to begin with but costing you a lot more money?”
$363.99 Average premium subsidy received by consumers in Florida for 2017 Obamacare coverage
The CBO agrees with the premise of the Urban Institute’s report on cost sharing reductions, though the nonpartisan agency does not break out federal spending changes by state. Over the next decade, the CBO reported, the federal government would save $118 billion by canceling the cost-sharing subsidies — but spend an additional $365 billion for the increase in premium subsidies.
Not all states will benefit in the same way as Florida, though, Blumberg said, because some states told their Obamacare insurers to price plans assuming that the cost-sharing reductions would continue or gave them no instruction at all.
In those states, insurers will have to refile their 2018 rates and might not be able to do so before open enrollment for the ACA exchange begins Nov. 1.
In Florida, most consumers with a standard ACA plan and a premium subsidy won’t see their monthly costs rise, and some might even pay less than they did the prior year.
Florida Blue, the state’s largest health insurer, has nearly 1 million Obamacare consumers. Douglas Bartel, a spokesman, said in a written statement that more than 90 percent of Florida Blue’s Obamacare consumers “should have modest premium increases for next year, or will see slight reductions in premiums due to increased subsidy levels.”
But ACA consumers who earn too much to qualify for any subsidies will see significant price increases on the exchange next year. About 106,000 people, roughly 7 percent of Floridians who bought an ACA plan in 2017, paid full price, according to federal estimates.
Bartel said Florida Blue is offering 12 health plans sold off the ACA exchange with lower premiums and similar benefit designs and provider networks as Obamacare coverage.
Among Obamacare consumers who qualify for a subsidy, though, the CBO reported that those with incomes between two and four times the federal poverty level could pay premiums next year that are equal to or less than those for the same plan they had in 2017 — or switch to a plan that covers more of their costs.
Why would you make a change that ... is going to end up leaving you where you were to begin with but costing you a lot more money?
Linda Blumberg, Urban Institute
The main reason those Obamacare consumers could pay less or switch to better coverage for the same price is that premium subsidies would increase for all eligible consumers while premiums for non-standard plans would not change substantially, the CBO said.
“As a result,” the CBO report states, “more people would purchase plans in the [Obamacare] marketplaces than would have otherwise and fewer people would purchase employment-based insurance — reducing the number of uninsured people, on net, in most years.”
But Steven Ullmann, a health policy expert with the University of Miami, said consumers need to be careful of “hidden costs,” such as deductibles, when switching to better coverage, even if it’s offered at the same monthly premium as a lower-level plan.
With more than 115 health plans offered in Florida on the ACA exchange, Ullmann said, the coverage options can be overwhelming for many consumers.
“In Mami-Dade, you have so many choices of plans,” he said. “And now to work through the logistics and figure out the interaction between premiums, deductibles, co-payments, co-insurance rates, no cost-sharing reductions and a higher premium tax subsidy, it just becomes a very complex decision-making process that, I tell you, even with my PhD, I find it confusing.”
Ullmann said he has a difficult time seeing the uninsured rate dropping in Florida as a consequence, even an unintended one, of the president’s decision to cancel the cost-sharing subsidies. Especially if the Trump administration chooses not to enforce the individual mandate, or the part of the health law that requires every eligible American who doesn’t get insurance through work to buy a health plan. Or pay a fine that is either 2.5 percent of household income or $695 per adult and $347.50 for each child younger than 18.
Another concern is the president’s proposal to allow insurance coverage with lower premiums and fewer benefits, which could siphon young and healthy consumers from the ACA exchange and cause prices to spiral out of control, Ullmann said.
“If you have healthy, young people drop coverage, or take up bare-bones plans, that will drive up cost of plans for those who have pre-existing conditions, and only those who are at higher risk would purchase health insurance,” he said. “What happens then is you start pricing people out of the market who perhaps need the insurance the most.”
In the long run, said Blumberg of the Urban Institute, the president’s executive order on health coverage and canceling of the cost-sharing subsidies will undermine the stability of the ACA exchange.
“There’s not a rational policy basis for doing what he’s doing,” she said.