CBO Report: Short-Term, Long-Term Effects of Subsidy Cuts

If the Trump Administration ends the Affordable Care Act’s cost-sharing reductions that help insurance companies provide lower income people with more affordable plans, premiums for that population would increase 20% in 2018, and the number of uninsured would rise by about 5%, according to the Congressional Budget Office (CBO) report issued this week.

But CBO noted that when premiums rise for the affected population tax credit amounts would also increase because the tax credits are linked to rising premiums. Therefore, CBO said, affected people would experience a wash but the government through the increased tax credits would see the deficit rise by about $194 billion from 2018 to 2026.

Also, while the number of people living in areas with no insurance would increase over the next two years, by 2020 that number would be about the same as now.

The Administration’s mixed messages about whether it will extend the cost-sharing reductions has caused turmoil in the insurance market, with insurers – which favor the CSRs – saying they need some sort of certainty to set rates. The administration has been extending the CSRs on a month-by-month basis; at this point they only exist through the end of August with a decision on extending them further expected as soon as next week.

The full CBO report is here.