October 15, 2017
Donald Trump has justified his decision to ending a subsidy for insurers providing improved coverage for moderate-income households by saying that he wanted to end subsidies for insurers. Actually, because insurers are required under the Affordable Care Act to provide these subsidies to moderate-income households whether or not they receive the government subsidies, Trump’s decision will likely lead to higher premiums. And, since the subsidy provided to moderate-income households depends on the size of the premium, the subsidies provided to these households will rise in step with the premiums.
As a result, while Trump is cutting off the direct subsidy to insurers from the government, the indirect subsidy through the government’s assistance to households buying insurance will increase by an even larger amount. As a result, the Congressional Budget Office projects that the amount the government will pay out in insurance subsidies over the next decade will increase by almost $250 billion (roughly 0.5 percent of federal spending), with the bulk of this money ending up in the pockets of insurers.
It is not clear that Trump understood that his action would increase the money going to insurers, but it would have been helpful to note this outcome.
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