The Trump Administration’s decision to eliminate the federal subsidies that help low-income people pay out-of-pocket expenses under Obamacare created an uproar Friday among health care advocates and others worried it could severely undermine the health insurance program.
The administration’s decision to stop paying the subsidies, announced late Thursday night, could result in skyrocketing premiums and cause more insurance companies to exit the market, critics said. That would wreak havoc on the insurance exchanges created under the Affordable Care Act, potentially reversing the progress made to insure the nation’s uninsured.
The announcement prompted an almost immediate reaction Friday. Maryland Attorney General Brian Frosh announced that the state was joining 17 other states and the District of Columbia in a class-action lawsuit against the Trump Administration.
CareFirst Blue Cross BlueShield, which has about 75 percent of the exchange market in Maryland, said it plans legal action, too.
Advocates said eliminating the subsidies could roll back the gains that state has made on getting people insured. About 243,000 Marylanders enrolled in health insurance plans through the exchange for 2017.
“We hope that the courts will very quickly realize they need to step in and block this rogue president from undermining health care for millions of Americans,” said Vincent DeMarco, a longtime supporter of Obamacare and president of the Maryland Citizens' Health Initiative, an advocacy group.
The subsidies, paid directly to insurance companies, were never funded by Congress. Since there was no appropriation for such payments "the Government cannot lawfully make the cost-sharing reduction payments," the White House said in a statement.
Opponents of the Affordable Care Act welcomed Trump’s latest move.
"For years, the Obama Administration blatantly violated the Constitution by improperly funneling billions of dollars to insurance companies without Congressional appropriations,” Rep. Andy Harris, Maryland’s lone Republican in Congress, said in a statement. “I applaud the President’s decision to end this unconstitutional practice.”
Insurance companies used the subsidies — known as cost sharing reductions — to help lower the costs for deductibles, copayments, and coinsurance for low-income people and families.
In Maryland, 56 percent of people who buy insurance under Obamacare receive those subsidies. Nine in 10 people in the state received that or some other kind of financial assistance to help with the cost of health plans in 2017.
Maryland insurers receive between $5 million and just under $8 million a month in cost-sharing subsidies, according to an analyst with the state Department of Legislative Services.
CareFirst said it could face losses of $50 million in 2018 if the subsidies are eliminated and it can’t raise rates. The insurer also is in talks with state regulators to raise rates by an additional 20 to 21 percent for next year on people who receive the subsidies.
“We are certainly of the view that this is an act on the part of the government that fails to fulfill its promises,” said Chet Burrell, CareFirst president and CEO. “We are definitely looking at legal action.”
Frosh said in a phone interview that Trump did not follow the rules of the Administrative Procedure Act, which requires government authorities to follow certain procedures when adopting new rules, including allowing for public comment. He called the decision reckless, destructive and unconstitutional.
‘This is another instance of Trump thinking he’s above the law,” Frosh said.
Trump however criticized the subsidies as “a payoff” for insurance companies.
“That's not going to people; that's making the insurance companies rich,” the president said before boarding Marine One Friday.
State officials, meanwhile, were struggling Friday with what to make of the decision.
The Maryland Health Benefit Exchange, which oversees the Affordable Care Act in the state and runs the exchange where people buy insurance, referred comments to the office of Governor Larry Hogan.
Doug Mayer, a spokesman for the governor, said that Hogan was opposed to Trump’s decision to end subsidies.
Mayer declined to answer questions about whether Hogan would pursue specific state-level remedies to shore up the insurance market.
“We are examining the policy to determine its full impact on Maryland,” Mayer said. “Governor Hogan has made clear that while the current system is in need of significant reform, he will not support any move that jeopardizes Marylanders' health care coverage.”
Insurance Commissioner Al Redmer said he had not yet gotten a formal notice that the subsidies would be eliminated. But he directed his staff to review the rates approved in August for plans sold by CareFirst and Kaiser Foundation Health Plan of the Mid-Atlantic States, the only other insurer to offer plans on the state exchange.
The commission had approved average rate increases of just over 23 percent to nearly 50 percent, depending on the plan. They are now considering boosting some of those increases, Redmer said.
Kaiser did not say whether it would ask for an adjustment in rates, but criticized the Trump administration’s moves in a company statement.
“We strongly encourage policymakers to continue the commitment in current law to consumer protections at the state and federal level,” said Kaiser CEO Bernard J. Tyson. “In addition, as priorities for any additional proposals around health reform are considered, we would recommend that policymakers focus on stabilization of the current marketplace and the 30 million Americans currently without coverage.”
Other states tried to account for the possibility Trump would end the subsidies. In Virginia, officials told insurers they could add a surcharge if it happened, but Maryland did not allow that possibility to be considered.
“Actuaries are going back into the rates in order to identify what the reality is,” Redmer said. “As regulators we cannot allow them to knowingly sell a product at below the amount needed to sustain their business.”
Redmer said the state would have to move quickly to ensure a transparent process if rates must be changed. The exchange is scheduled to begin selling plans for next year on Nov. 1.
“Certainly, it is going to be challenging because we have open enrollment quickly approaching,” Redmer said. “For weeks now the folks at the exchange have been doing all the magic of taking the rates and putting them into the system. If we are in position where we have to unwind that and reload new data, that is going to be challenging from an operation perspective.”
The announcement on subsidies came the same day the president signed an executive order to let more Americans buy coverage outside of the state exchanges. The order was touted as making it easier for insurers to sell inexpensive health plans with less coverage than is required under Obamacare.
Critics said the order would drive the healthiest people off of exchange plans and drive up premiums for the sickest.
“This is a one-two punch to hurt the viability of the individual market,” said Dr. Joshua Sharfstein, who was state health secretary when Obamcare was adopted. “It’s a clear attempt to destabilize the market.”
Leni Preston, president of Consumer Health First, said cutting the subsidies could make the cost of insurance unattainable for many people.
“This is clearly an effort to undermine and sabotage the Affordable Care Act, seemingly for political purposes, because it is hard to believe that anybody would want to so drastically disrupt the individual market,” she said.
Sun reporters Erin Cox and John Fritze contributed to this report.