President Trump intends to end insurance subsidies under Obamacare, a move that would likely result in lawsuits and put pressure on Congress to act.
According to a statement Thursday evening from the White House press secretary, Sarah Sanders, the Trump administration is making its decision based on guidance from the Department of Justice and the Department of Health and Human Services, which have concluded that there is no appropriation for the funds, called cost-sharing reduction payments, to insurance companies under Obamacare.
"In light of this analysis, the government cannot lawfully make the cost-sharing reduction payments," Sanders said in a statement.
Trump has been authorizing the funds every month but has repeatedly said that he was considering the move in order to bring about a deal on healthcare, and the decision comes only hours after he signed an executive order on Obamacare that critics said would damage the Obamacare exchanges.
Cost-sharing subsidies have featured heavily in the debate over who is responsible for the troubles facing Obamacare's exchanges. The funds were originally authorized under former President Barack Obama, resulting in a lawsuit by the House because Congress had not appropriated them. A federal judge sided with the House but the funds continued to be authorized as the case was under appeal, a situation that remained in limbo as Trump took the helm at the Oval Office.
"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," Sanders said in her statement. "Congress needs to repeal and replace the disastrous Obamacare law and provide real relief to the American people."
The administration was set to update the court on the case on Oct. 30.
Eric Hargan, the acting secretary at the Department of Health and Human Services, and Seema Verma, administrator for the Centers for Medicare and Medicaid Services, said the payments would end immediately. The funding is typically authorized around the 20th of each month.
Verma and Hargan said in a statement that their agencies determined the Obama administration "overstepped the legal boundaries drawn by our constitution."
The cost-sharing funds, estimated at roughly $7 billion for this year, pays for low-income consumers' out-of-pocket medical expenses. Under Obamacare, insurers are required to offer lower costs for these services, for which the government then reimburses them. If they do not receive the funding, they must still offer discounts, and without an action from Congress they would be likely to sue for the money.
The uncertainty over the future of the payments has contributed to insurer exits and planned premium increases for 2018, though insurers also acknowledge that they were losing money through the exchange business, where too few young, healthy enrollees purchased their plans.
Cutting off the subsidies would increase the number of uninsured by 2 million people in 2018 and would result in insurance costs that are 20 percent higher than already-expected increases, according to the Congressional Budget Office.
Members of the Senate Health, Education Labor and Pensions Committee have been working on a bipartisan deal to appropriate the funding, but Republicans say that Democrats have been unwilling to provide an adequate trade-off to them in the form of greater flexibility for states. Upon seeing the news about the funds being cut off, several Democrats took to Twitter on Thursday night to say Congress must act.
Senate Minority Leader Chuck Schumer, D-N.Y., and House Minority Leader Nancy Pelosi, D-Calif., put out a joint statement to condemn the move by the White House.
"It is a spiteful act of vast, pointless sabotage leveled at working families and the middle class in every corner of America," they said.