President Trump's threat to use Obamacare payments to leverage support from Democrats follows one of his recommendations for business success in "The Art of the Deal," but polls and expert projections suggest that a decision to withhold billions from health insurance companies could not only cost him politically but result in dire consequences for those who rely on medical coverage.
The funds, called "cost-sharing reduction" subsidies, help insurance companies reduce out-of-pocket medical expenses for low-income people who buy coverage on Obamacare's exchanges. Though they are currently being distributed to insurance companies, their future remains uncertain because of ongoing litigation about whether they were illegally distributed, as well as lack of clarity from Republicans on the future of Obamacare.
The ramifications of ending these payments, which are expected to total $7 billion in 2017, are projected to be so explosive that experts have dubbed taking this route the "nuclear option" for undoing Obamacare.
"Many counties could have literally no insurer," said Larry Levitt, senior vice president for special initiatives at the Kaiser Family Foundation. "And then there would be no way for people to get tax credits for help people pay for their premiums. It's a complicated domino effect."
The situation hinges on a lawsuit House Republicans filed against the Obama administration in 2014, arguing that the cost-sharing subsidies were unconstitutional because they should have been appropriated through Congress. After a federal judge sided with their position, the Obama administration appealed the case and Republicans moved to delay it earlier this year after Trump won the Oval Office.
Should the administration drop the appeal, insurers who are legally on the hook for those costs would move to remove enrollees from their plans as quickly as they are able and leave the marketplaces. The situation would play out in various ways depending on state laws. For instance, some state residents would not be able to buy tax-subsidized coverage, while other residents will see steep premium hikes.
Dania Palanker, assistant research professor at Georgetown University's Center on Health Insurance Reforms, explained that dropping the funding may end up costing the federal government more because it would have to contribute more money to another program in Obamacare that reduces premiums for low-income enrollees. Insurers that stay in the exchanges likely would raise premiums as a way to recoup costs.
Trump sent mixed messages in an interview with the Wall Street Journal Wednesday, saying first that he might withhold the payments as a way to bring Democrats to the table on changes to Obamacare, then saying that he might allow the payments to continue because the public's views would shift on who is responsible for problems the law faces.
"The longer I'm behind this desk and you have Obamacare, the more I would own it," he said.
Indeed, polling suggests that some of the public already perceives Obamacare's future this way. According to a recent tracking poll from the Kaiser Family Foundation, 80 percent of Democrats, 65 percent of independents and 34 percent of Republicans believe that Trump and congressional Republicans are responsible for any problems with Obamacare in the future.
Democratic lawmakers have said they will refuse to negotiate on the subsidies, which help roughly 7 million people pay for medical expenses. Instead, they are setting their own ultimatum: Fund the cost-sharing reductions subsidies through a spending bill due April 28 or the government will face a partial shutdown.
That approach, however, could wind up being politically sensitive for Democrats, Levitt said. It's not clear whom the public would blame if the government partially shuts down.
"There's always a risk to shutting down the government," he said. "There's always a risk of whether the public will perceive that you're overplaying your hand."
But if a shutdown is avoided and the funds are appropriated through Congress, insurers will know that the subsidies are guaranteed and lawmakers will have found a way to get around the lawsuit dilemma in part. Still, other hurdles remain. The spending bill will require 60 votes to pass the Senate, where Republicans hold a narrow, 52-seat majority, and Trump could always veto the final package.
Nicholas Bagley, an administrative law expert from the University of Michigan Law School, said the administration should allow the funds to be appropriated rather than be concerned about whether the decision in the lawsuit gives the House standing to sue the executive office, an argument that has been used before.
"The Obama administration's argument about why an appropriation existed was and is terrible, but it raises a hard question about what do you do now that millions of people are dependent on a system that provides these funds," he said.
"They should do it regardless of how they feel about the Affordable Care Act," he added, using the formal name for former President Barack Obama's healthcare law.
It's not clear how ultimatums will shape the legislative process. After Trump gave House Republicans an ultimatum last month on a bill that would repeal parts of Obamacare, called the American Health Care Act, the legislation was pulled before it reached the floor for a vote, largely because centrists and conservatives didn't agree on its details. House members are in the middle of a two-week recess, and the delay has increased uncertainty for insurers.
"The uncertainty is very problematic for insurers," Palanker said. "It's been problematic and the closer we get to the filing deadline … they really do not know how to price their plans. They may or may not have millions of dollars in unpaid liability for some plans."
Insurers have become increasingly vocal about the funds as they are getting closer to a deadline for submitting prices for their policies and soon will have to decide whether to participate in the exchanges next year. Insurers have banded with medical providers, who could see increases in uncompensated care, to ask the administration and congressional leaders to fund the program.
Some insurers aren't waiting to find out about the future of Obamacare repeal. Humana announced it will be withdrawing and two insurers recently pulled out in Iowa, citing losses and uncertainty. More could follow, particularly in states where they only have until May 1 to submit rates.
"In an election year there could potentially be millions of people losing their coverage," Levitt said.