HomeWashington Letter2017 ▶ Trump Administration Announces Decision to Stop ACA Subsidy Payments
Trump Administration Announces Decision to Stop ACA Subsidy Payments

October 2017

This week, Trump Administration officials confirmed that the President has decided to end federal subsidies for premiums, copays and deductibles for individuals who purchase health insurance on the individual markets. While the announcement was lacking many details, including when the payments would be suspended and whether Congressional action on bipartisan health care legislation would alter the President’s decision, the announcement has profound effects on the U.S. health insurance market. The decision cuts an estimated $7 billion in federal payments and will impact approximately 6 million individuals.

The likely immediate impacts of this decision will include, many insurers withdrawing from the individual health insurance market, a sharp increase in costs for those plans remaining on the individual market and according to CBO estimates, a 1 million increase in the number of uninsured individuals in 2018.

The status of federal payments for premium, copay and deductible support has been a flashpoint between supporters and opponents of the ACA. As envisioned by ACA supporters, federal subsidies were intended to lower the cost of insurance for people in the individual market who are below 400 percent of poverty, but do not qualify for Medicaid. However, Congressional opponents of ACA have challenged these payments in court saying payment of these subsidies without explicit Congressional approval was illegal. A lower court has ruled against the legality of these payments, but stayed court proceedings pending further challenges.

Some observers believe this is a power play by the Administration to force Congressional Democrats to accept significant revisions to ACA, while others see this as President Trump’s attempt to deliver on campaign promises to dismantle the ACA. Regardless of the motivation, the announcement will add significant uncertainty in both state insurance markets and efforts in Washington D.C. to address problems in the U.S. health insurance market.

Last Reviewed: October 2017