How Trump Could Gut Obamacare Without Congress

Although President Donald Trump failed to persuade Congress to repeal Obamacare, his administration has a tool ready-made next month to gut the law — and it would not even require a vote by lawmakers.

A status conference is set for May 22 on a lawsuit pending before the D.C. Court of Appeals on a challenge to a subsidy that insurance companies receive to reduce out-of-pocket costs of some 6.4 million lower-income customers who purchased mid-level “silver” plans on the online exchanges set up by the Affordable Care Act.

“If the end result of this is that those cost-sharing subsidies go away, this starts to effectively unwind the ACA marketplaces.”

U.S. District Judge Rosemary Collyer last May declared those subsidies illegal because Congress never appropriated money for them. She put her decision on hold to give former President Barack Obama’s administration a chance to appeal, which it did. But now it is the Trump administration that must decide the next move. It could simply drop the appeal, which would mean Collyer’s decision would take effect.

“If the end result of this is that those cost-sharing subsidies go away, this starts to effectively unwind the ACA marketplaces,” said Craig Garthwaite, co-director of the Health Enterprise Management Program at Northwestern University’s Kellogg School of Management. “It takes a fragile marketplace and throws it on the ground.”

The Affordable Care Act offers two main subsidies. The first, unaffected by the litigation, offers help paying monthly premiums for individuals making up to $47,520, or $97,200 for a family of four— 400 percent of the federal poverty line. The second, known as “cost-sharing reductions,” help people making less than 250 percent of the poverty line with co-pays, deductibles and other out-of-pocket expenses not covered by insurance.

According to the Kaiser Family Foundation, an individual silver-plan holder with medical and prescription drug coverage earning less than $17,820, or a family of four making less than $36,450 — 150 percent of the poverty line — would pay an average deductible of $255, a $3,354 savings from the normal cost of $3,609.

With payments projected to total $9 billion this year, a cutoff would wreak havoc in insurance markets, according to experts. Seth Chandler, a University of Houston Law Center professor and a visiting scholar at George Mason University’s libertarian Mercatus Center, noted that insurers are obligated to make the payments for low-income customers whether they receive the subsidies or not.