Cost-sharing reduction payments: What are the subsidies Trump cut?

President Donald Trump announced late Thursday that his administration will immediately end certain health care cost-sharing subsidy payments in his latest effort to dismantle ObamaCare.

The Department of Health and Human Services determined that there is not appropriation for so-called cost-sharing reduction payments to insurers, the White House said.

“The bailout of insurance companies through these unlawful payments is yet another example of how the previous administration abused taxpayer dollars and skirted the law to prop up a broken system,” the White House said in a statement.

What are cost-sharing reduction payments?

As part of ObamaCare, cost-sharing reduction plans are special subsidies paid by the federal government that, in part, alleviate copays and deductibles for people with lower incomes who purchase insurance through the marketplace.

The savings could reduce a deductible of $3,500 to a few hundred dollars. called these subsidies “extra savings.”

In order to qualify, people would have to be enrolled in the marketplace’s Silver plan – where a consumer pays “moderate” monthly premiums and “moderate” costs.

About 57 percent of people enrolled in the marketplace receive cost-sharing reduction subsidies.

What happens if these payments are stopped?

Halting the payments is expected to result in an increase in premiums next year as insurers will have to continue to provide the subsides to consumers, experts warned.

The nonprofit Kaiser Family Foundation estimated that insurers would have to raise premiums by approximately 19 percent to make up for the loss of the government’s payments. Consumers who already receive tax credits that cover the cost of their premiums shouldn’t be affected by any expected rise in premiums.


The foundation also said that the premium increases for Silver plans would be lower in states with an expanded Medicaid program but higher in states without.

The Congressional Budget Office estimated that these payments cost about $7 billion in 2017 and will cost $16 billion by 2027.

In an early morning tweet, Trump urged congressional Democrats to work with his administration to fix the “imploding” ObamaCare.

“Massive subsidy payments to their pet insurance companies has stopped,” he said.

The Associated Press contributed to this report.