Only hours after signing an executive order that undermines several key aspects of the current health care law, President Trump has made good on his repeated threat to pull the plug on billions of dollars in subsidies provided by the federal government to insurers in the individual plan market.

The Affordable Care Act provides for the federal government to make significant monthly payments to insurers who participate in the individual health insurance exchanges. These subsidies — which will total around $7 billion this year — are intended to keep out-of-pocket expenses, like co-pays and deductibles, low, particularly for Americans making between 100% and 250% of the federal poverty line.

Trump has made no effort to hide his distaste for these payments, referring to them as a “bailout” for the insurance industry. Since the subsidies are not appropriated by Congress, the White House has repeatedly made the argument that it has the authority to stop the payments at any time.

Hours after the President signed an executive order that the administration claims will increase the availability of affordable insurance — but which critics counter will only result in people buying insurance that covers less, and drives up costs for those who need coverage — the White House released a statement declaring an end to the subsidies.

The administration claims in its statement that the Department of Justice and Department of Health and Human Services have concluded that these payments are not legal, as they were not appropriated by Congress. That claim has been the subject of an ongoing legal dispute, started by a lawsuit filed in 2014 by Republican members of the House of Representatives.

“The bailout of insurance companies through these unlawful payments is yet another example of how the previous administration abused taxpayer dollars and skirted the law to prop up a broken system,” reads the White House statement. “Congress needs to repeal and replace the disastrous Obamacare law and provide real relief to the American people.”

While the statement gives no definite end date for the subsidies, the Washington Post reports that they may cease as of November.

How Will This Affect Insurance Rates?
Even though rates are already locked in for the 2018 Obamacare open enrollment period that begins Nov. 1, the seeming inevitability of the end to the subsidies has already had an effect on the cost of insurance.

Many insurance companies, sensing that the Trump administration might cut off the subsidies at some point in the coming year, significantly raised their base premiums for policies to be sold on the individual market for 2018. These premium hikes, said some insurers, were intended as a buffer in case the payments did cease.

Without these subsidies, some insurers will certainly abandon the individual marketplace going forward, putting the structure put in place by the Affordable Care Act in serious jeopardy and possibly leaving millions of additional Americans with only one — or possibly no — insurance company to choose from in their region.

Tonight’s decision will most certainly face a legal challenge from those states who have already intervened to protect the subsidies in court after the administration abandoned their defense.

New York state Attorney General Eric Schneiderman, who had previously stated that he would do “whatever we have to” to defend the payments, said on Thursday night that he intends to file a lawsuit against the administration to protect the subsidies.

“I will not allow President Trump to once again use New York families as political pawns in his dangerous, partisan campaign to eviscerate the Affordable Care Act at any cost,” said Schneiderman.

The other option would be for Congress to do what it didn’t do when the Affordable Care Act was passed nearly a decade ago, and use the appropriations process to provide these funds to insurers. Given the hardline conservative opposition to the payments, it would require Republicans and Democrats to work together to garner sufficient support for such appropriations.

In response to the White House announcement, our colleagues at Consumers Union warned that the subsidy cut will likely result in higher premiums and insurers exiting the individual market.

“There is simply no one that benefits from the Administration’s decision to stop the cost-sharing reduction payments,” sayd Betsy Imholz, Special Projects Director at CU, citing a Congressional Budget Office analysis which found that ending subsidies would likely result in an immediate 20% increase in insurance premiums. “It is now more imperative than ever that Congress act to protect consumers and permanently fund the CSR payments as originally intended. Otherwise, consumers and taxpayers will pay the price.”

(Updated to include CU statement.)

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