Feds could spend $2.3 billion more without insurance payments

Spending by the federal government could increase by $2.3 billion if the Trump administration cuts off Obamacare payments that help insurers reduce out-of-pocket medical costs for poorer customers, according to a study released Tuesday by the Kaiser Family Foundation.

The legality of the payments, called "cost-sharing reduction subsidies," was challenged under a House lawsuit brought against former President Barack Obama, and the case has been temporarily delayed. If a federal appeals court cancels the funds or the Trump administration drops an appeal on the case, insurers are expected to leave the exchanges as soon as they are able or increase premiums to make up for their losses.

If at least one insurer remains in every county, as presumed in the Kaiser Family Foundation analysis, premiums would increase by an average of 19 percent for silver, or mid-level, plans. To offset costs for consumers, the government would need to increase its spending on premium tax subsidies, another Obamacare provision that helps people reduce the cost of private insurance.

Because the payments for cost-sharing subsidies are estimated at $10 billion in 2018, and the additional cost of the premium tax credits estimated at $12.3 billion, the net increase in federal spending would be $2.3 billion.

Another scenario is possible. The costs to the federal government would drop if more insurers chose not to stay in the exchanges, but that would result in fewer, or even no, insurers for customers to choose subsidized plans from. Several insurers already are pulling out next year, citing losses and uncertainty.