President Trump Is Still Making Illegal Payments to Insurers Under Obamacare

The health law's CSR subsidies aren't a matter of executive discretion.


Gage Skidmore / Foter

For months, President Trump has threatened to cut off a series of payments being made to insurers participating in Obamacare's exchanges.

These payments are known cost-sharing reduction subsidies (CSRs), and they are paid directly to insurers in order to offset deductibles and other out of pocket costs for lower income individuals enrolled in Obamacare plans.

Trump has held out these payments as political bargaining leverage, warning that if Congress did not act to repeal and replace the law, he would end the payments, and Obamacare would implode. Trump's decision to treat the payments as discretionary ignores a federal court ruling that the payments never should have been made in the first place.

What, exactly, would happen if the payments were cut off at the end of 2017? Higher premiums, larger federal deficits, and short-term instability, according to a new Congressional Budget Office report.

Premiums would end up 20 percent higher than if the payments were continued, and 25 percent higher after 2020. Most individuals enrolled in Obamacare plans would not feel the impact of those premium increases directly, however, because insurers would raise the cost of plans that are subsidized through a separate provision in Obamacare. Those subsidies, a form of tax credit, rise with the price of premiums, and, as a result, the federal deficit would increase by about $194 billion over a decade.

In addition, CBO predicts that some insurance plans would drop out of the individual market next year, leaving about 5 percent of the country without access to an Obamacare plan in 2018. By 2020, however, insurers would re-enter the market in most places. In the short-term, about 1 million fewer people would be covered, but after 2020, the CBO estimates that coverage rates would be higher by about 1 million, owing primarily to the interaction between the CSR payments and the law's tax credit.

The result, in other words, would not be a full-on implosion, but increased short-term instability, and higher federal spending on Obamacare going forward. In addition, it is possible that if the federal government cut off CSR payments, some states would set up programs to funnel money to insurers using the health care law's state waiver program.

The CBO, as an economic forecasting organization, treats the potential end of the health law's CSR payments primarily as a policy question, looking at the likely ripple effects on the insurance market as it exists under Obamacare. And Trump has treated the CSR payments as a point of executive branch discretion, to be dangled in hopes of gaining political leverage.

But the reason that the future of the payments is uncertain is that they are the subject of a legal dispute left over from the Obama era. The CSR subsidies are called for in the statute of Obamacare, but Congress declined to appropriate any money for them. The Obama administration, which had requested an appropriation, decided to pay them anyway.

House Republicans sued the Obama administration, arguing that under the Constitution, only Congress has the power of the purse, and that Congress was injured as an institution when the Obama administration made the payments without a clear appropriation.

Last year, a federal judge sided with House Republicans, ruling although the payment had been authorized under the law, it had not been appropriated. "Congress is the only source for such an appropriation," Judge Rosemary Collyer's ruling declared, "and no public money can be spent without one." The payments had been made illegally. The ruling was stayed pending appeal, and has been on hold since Trump won the presidency.

The point of the House GOP lawsuit, then, was that the executive branch does not have a choice. Either the administration has an affirmative duty to make the payments, or it has an affirmative duty not to make them. The judge ruled that the president has an affirmative duty not to make the payments without an explicit Congressional appropriation, and that doing so violates the Constitution.

There may be reasons to quibble with the particulars CBO's estimates, which are, as always, subject to substantial uncertainty. But the policy ramifications of cutting off these payments are worth understanding, especially since today's report suggests that cutting off federal payments now would lead to greater spending in the long term.

Yet in assessing the Trump administration's actions, the relevant question is not what effect they would have on premiums or coverage or spending, but whether they are constitutionally justified. Judge Collyer's ruling was clear that they are not. By continuing to make these payments, and by treating them as a matter of executive discretion, Trump is participating in and perpetuating illegal and unconstitutional behavior.

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  1. How would the increased individual subsidy payments end up costing more than the up front CSR payments?

    1. Gender fluid treatments.

    2. I really want to see this math myself. That's an impressive setup.

    3. Insurers would boost the premiums of silver-level QHPs (the ones eligible for CSR subsidies for people earning less than 250% of the FPL), which would boost tax credit outlays for everybody under 400% of FPL (tax credits are calculated to make the second-lowest priced silver plan no more that 8.5% of income - the more expensive silver plans are, the higher the tax credit subsidies go).

    4. Insurers would boost the premiums of silver-level QHPs (the ones eligible for CSR subsidies for people earning less than 250% of the FPL), which would boost tax credit outlays for everybody under 400% of FPL (tax credits are calculated to make the second-lowest priced silver plan no more that 8.5% of income - the more expensive silver plans are, the higher the tax credit subsidies go).

  2. We've gone from: "Obamacare is bad" to "The Republican repeal is worse" to "Trump is continuing the illegal payments" to "Trump is acting like he has discretion in making these payments" to "If you don't make the payments it will be even worse".

    Mitch McConnell is that you?

    1. I don't see anything here about anything being bad or worse. Just dry policy/legal analysis.

      1. "What, exactly, would happen if the payments were cut off at the end of 2017? Higher premiums, larger federal deficits, and short-term instability, according to a new Congressional Budget Office report."

        1. That's just a statement of fact. CBR either did or didn't say that.

          1. All of those articles were based on fact. You can develop conflicting 'facts' from various sources. What facts you choose to use is your opinion. CBO is not a definitive source of what is or isn't reality

            1. CBO thinks there are 16-17MM ppl on the exchanges this year and that's what they based their 22MM "losing" (yes, it's really 22MM fewer would be insured than under existing law) insurance number on. It's 10. Now about that reality...

  3. Peter Suderman needs to get over his TDS. High ranking Senators have specifically requested that Trump keep making the payment while they work on the legislation to fund them. Is this irregular? Yes. But it's clearly not the high crime that Suderman is painting it to be.

    Barack Obama insisted he could make the payments even without Congressional assent. Trump is merely willing to keep the payments going, because Congress has asked him to.

    1. That doesn't necessarily make it not illegal. Or is "Obama did it too" a valid excuse now?

      1. "Obama did it" and "Hillary would have done it" are the go-to rationalizations for the Team Red cheerleaders

        1. That's what Obama would say or Hillary for that matter

        2. And "Booosh did it" were the go-to rationalizations for Team DemoRats and their cheerleaders.

      2. Indeed, and while I find it a troubling double standard if Trump were not shitty he would have ended them day one.

        I didn't buy the 'because Bush' during the Obama years, I refuse to say 'because Obama' if I can help it.

        I suppose in a bizarre way I have them to thank for my view on Government, frankly, and why I've read a lot of the things I've read.

    2. Not "because Congress has asked him to", but because some Senators did. I think that if Congress wants something done, they need to pass a resolution by majority vote, not just have individuals make statements. Otherwise laws becomes even more unpredictable than they already are.

      1. Predictable laws? What is in that for anyone?

      2. Do you ever think "Why Trump is always winning?"?
        His speech writers are a genius, be sure you can find better only in one place.
        And this place of essay writers always waiting for some interesting orders.
        By the way, you can write the opinion about his last speech in Congress.

    3. Suderman needs to make up his fucking mind. Does he want to be a bleeding heart or does he want to follow the Constitution?

    4. "High ranking Senators" =/= "Congress". Congress has not asked Trump to keep the payments going, some top-dog Senators did (or may have).

      (We may also note that when Obama launched air strikes in Libya to topple Qadaffi he claimed that he had notified Congress of this by means of a closed meeting with a few Congressional "leaders". Is Trump really taking a page or two from Obama's playbook?)

      It's not rocket surgery. If Congress wants to keep the payments going, let them pass an appropriate law. Unless and until they do so, the court ruling prohibits Trump from doing what he is doing. So is anyone surprised that Trump is overlooking Constitutional limitations on his "discretionary" exercise of power? Show of hands, please.

  4. Drs. are not prescribing enough gender fluids.

  5. Gee, it's almost like Republicans elected on promises to repeal an unpopular law have no intention of actually doing so once in office. Who ever could have seen that coming?

  6. Judge Rosemary Collyer's overtly wrong ruling, which she didn't even have valid authority to make since Congress had no standing to sue, does not make the subsidies illegal.

    1. Did the House appropriate funds for it?

      1. No, but that's not the dispute. The Obama administration argued the CSRs were are mandatory entitlement, just as the advance premium tax credits are. The House - and Judge Collyer - disagreed.

  7. So... Suderman has managed to track down a situation in which some provision of the Constitution actually matters to the looter politicians currently occupying Washington? Wow!

  8. It irritates me how Obama effectively stole a shitload of money and nobody is even talking about the possibility of any repercussions. Not making excuses for trump here, but theres really no reason for him not to take that as an indication that he can do whatever he wants.

    1. Ahem. Either Trump represents a change in the way things are done or he does not. Either he wants to "drain the swamp", or he wants to swim in it. He can't eat his cake and have it too and his apologists need to be honest enough to admit when he is going off the rails on fundamental Constitutional issues.

  9. He has an oath to uphold the law and violating it can be grounds for impeachment. Those on the left want to impeach but this would leave them in quite a pickle. Likewise it would force the republicans to vote to fund the bailouts proving their continued support of Obamacare despite the promises.

    Oh if only there were a 3rd party with enough strength to push the issue and actually force the government to live up to the law and the constitution.

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  11. Republicans filed the suit that these payments were illegal and won yet chose to forfeit the win. More proof they never wanted to repeal and give power back to the people.

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