President Trump’s move late Thursday to cut off critical federal payments to insurers sent shock waves through the healthcare system Friday, threatening widespread disruption to markets nationwide and igniting new legal and political battles over the Affordable Care Act.
Caught in the middle are millions of Americans likely to see their insurance premiums shoot higher as the administration intensifies its effort to dismantle the 2010 healthcare law, often called Obamacare.
Insurers have said that markets in some parts of the country could collapse, leaving many consumers who don’t get insurance on the job with no choices for health plans. And state insurance regulators predicted premiums in the individual market nationally would rise by 12% to 15% next year because of the cutoff.
The move to cut off the money, known as cost-sharing reduction payments, came after months of indecision by the administration on the issue.
It marked a sudden lurch by Trump back to a strictly hard-line approach on healthcare after a brief period in which the administration had sent mixed signals on whether it might cooperate with bipartisan efforts in Congress to strengthen the Obamacare markets, rather than upend them.
The money at issue is roughly $7 billion in annual payments that the federal government makes to insurers to reimburse them for reducing deductibles and co-payments for low-income consumers, something the law requires health plans to do.
In both cases, Trump took more conservative positions supported by many of his core voters although unpopular among Americans at large.
A new survey by the Kaiser Family Foundation, released Friday, found that by better than 2-1, Americans said they would rather that Trump and Congress work to stabilize the marketplaces rather than continue to try to repeal and replace the current law. A majority of Republicans, however, said they preferred to see the focus remain on repealing and replacing the law.
Trump’s steps on both healthcare and immigration also threatened to blow up bipartisan talks in Congress and to severely disrupt the lives of ordinary Americans — some 700,000 Dreamers and millions of health plan consumers — as a way of putting pressure on lawmakers.
“If we’re going to do something, we need to get something in return,” the president said during an interview Wednesday with Fox News’ Sean Hannity that now seems to have presaged his moves on both issues.
A Twitter message from Trump on Friday morning and a statement by his budget director, Mick Mulvaney, made the approach explicit:
“The Democrats ObamaCare is imploding. Massive subsidy payments to their pet insurance companies has stopped. Dems should call me to fix!” Trump wrote.
Later, speaking to reporters, Trump said, “If the Democratic leaders could come over to the White House, we’ll negotiate some deal that’s good for everybody.”
Mulvaney, in an interview with Politico, said that Trump would not sign a bipartisan measure to restore the funds unless congressional Democrats went along with his priorities.
He listed the proposed border wall as one of the top priorities the president would consider trading.
“The president fully expects his priorities to be funded, and the wall is one of them,” he said.
That approach drew strong criticism Friday across the healthcare system, from patient advocates, in state governments and in Congress.
Democratic attorneys general in at least 19 states, including California and New York, said they would sue to stop the administration’s action. California Atty. Gen. Xavier Becerra called Trump’s action “sabotage, plain and simple.”
Senate Democratic leader Sen. Charles E. Schumer of New York said Democrats would not be “bullied” by Trump.
In a statement, he called Trump’s action a “spiteful act of vast, pointless sabotage leveled at working families and the middle class in every corner of America.”
Ironically, many of the consumers most likely to be hit with higher costs will be in demographic groups that lean strongly Republican — residents of rural areas, where insurance already tends to be more expensive than average, and self-employed people whose income is too high for them to qualify for federal subsidies for their premiums.
That’s one reason that several GOP senators have repeatedly urged Trump not to cut off the payments.
Maine Sen. Susan Collins, a centrist Republican who has opposed several recent GOP bills to repeal the current law, decried the president’s action. “We cannot simply wipe out the Affordable Care Act with a stroke of the pen without having a workable, better alternative in place,” she said in a speech in her home state Friday.
Nevada Gov. Brian Sandoval, a Republican, similarly criticized Trump’s move, saying in an interview with the Nevada Independent that “it’s going to hurt people, it’s going to hurt kids, it’s going to hurt families.”
The cost-sharing payments, which are designed to offset the cost of health insurance for low-income consumers, have been a center of controversy for years.
The Republican majority in Congress never approved an appropriation to cover the payments. The Obama administration concluded it could spend the money anyway under authority provided in the healthcare law. But last year, Republican members of Congress sued and won a court ruling that the payments were illegal. That decision was put on hold pending an appeal.
Thursday night, administration officials said the Justice Department had concluded that they had to stop the payments.
That reasoning was cheered by House Republican leaders.
“Under our Constitution, the power of the purse belongs to Congress, not the executive branch,” House Speaker Paul D. Ryan of Wisconsin said Thursday night.
But the Trump administration’s unexpected decision to announce the legal conclusion coincides with stepped-up rhetoric by the president attacking the current law and predicting its collapse.
“One by one, it’s going to come down,” the president told the Value Voters Summit, a conservative gathering, in Washington on Friday, referring to his efforts to end President Obama’s signature healthcare program.
The cost-sharing payments are made to health insurers to help them reduce co-pays and deductibles for low-income consumers.
For someone making just above the poverty line, the reductions in out-of-pocket costs can make the difference between a health plan with a deductible of $2,000 or more and no deductible at all.
If the payments are eliminated, insurers still are required to offer low-income consumers low-deductible health plans. But to compensate for the loss of federal funds, many insurers plan to raise premiums across the board.
Many Americans would be shielded from those increases because people who make less than 400% of the federal poverty line qualify for federal subsidies that lower their premiums.
But those who make too much to qualify for the subsidies will see huge increases next year in some parts of the country, rate filings indicate.
At the same time, because federal subsidies increase when premiums increase, the federal government also will end up paying more. Earlier this year, the nonpartisan Congressional Budget Office estimated that eliminating the cost-sharing payments would cost the federal government a net of $194 billion over the next decade because of the increased premium subsidies.
The cost also could be significant for some insurers and hospitals. Sheryl Skolnick, a health industry analyst with U.S. Equities in New York, sent a message to clients warning that “the effect of the order is likely to be profoundly destabilizing, disruptive and potentially materially damaging to hospitals” and some insurers.
Cathleen Decker in Washington contributed to this report.
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2:05 p.m.: This article was updated with additional reaction and analysis.
This article was originally published at 11:45 a.m.