The federal court decision blocking the government from reimbursing insurers for consumer discounts under the Affordable Care Act will result in higher health insurance premiums for everyone, the Obama administration said this week.
The ruling issued by Judge Rosemary M. Collyer of the United States District Court for the District of Columbia is considered a major victory for Republicans, who have been attempting to dismantle the ACA since its passage.
In her opinion, Collyer said that the billions of dollars paid to insurers since January 2014 was not appropriated by Congress, violating Article I of the Constitution.
The money subsidizes insurers who offer discounts that make health insurance more affordable to consumers by reducing co-payments, deductibles and other out-of-pocket costs. Without that support, the administration argues, insurance companies will need to charge higher premiums to cover increased costs.
In fact, a study from the Department of Health and Human Services suggests that premiums for mid-level “silver plans” could rise by nearly 30% once reimbursements are discontinued.
While some consumers would be shielded from the change, since they will be entitled to larger tax credits to help pay the higher premiums, taxpayers will bear most of the costs. Nonprofit research organization The Urban Institute estimates that total spending without the reimbursements will total $3.6 billion in 2016 and $47 billion over the next 10 years.
Even if Congress agrees to provide the money through annual appropriations, the administration says the decision causes great uncertainty in insurance markets – particularly given the fact that Congress so frequently is late in passing finance bills.
“If cost-sharing reduction payments were dependent on annual appropriations, insurers would be forced to set their premiums for the upcoming year in the face of uncertainty about the existence and amount of payments they would receive,” the administration said in court papers.
“That uncertainty would be inefficient and destabilizing. It would also inevitably lead to increased premiums.”
The Obama administration plans to appeal the decision, and Collyer held off on putting her decision into effect to allow for the process. For now, at least, it appears the market will not yet face this particular disturbance.
“We have a long judicial process head of us, so there’ll be no immediate change to anyone’s current benefit,” said Clare Krusing, a spokesperson for America’s Health Insurance Plans. “But if you eliminate the cost-sharing subsidies, it would certainly increase the overall cost of coverage.”
