If Congress refuses to appropriate billions to continue the Affordable Care Act's cost-sharing subsidies, it won't actually save a dime, according to a new study from the Kaiser Family Foundation.
That's because the ACA requires that insurers limit out-of-pocket spending for individual customers with incomes of less than $29,700, or 250% of the poverty level.
Currently, the federal government is spending $7 billion a year to lower deductibles and co-pays for about 8.4 million customers. Customers with the lowest incomes on the Obamacare exchanges have out of pocket spending capped at $255 annually.
The Kaiser Family Foundation said Tuesday that the subsidies, known as cost-sharing reductions, or CSRs, would cost the federal government about $10 billion in 2018. But if they're not paid, premiums would rise so much that the government would spend an additional $12.3 billion for refundable tax credits to buy silver plans on the insurance exchanges.
Congress has never actually voted to spend that money, and a federal judge ruled a year ago that it was illegal for the Obama administration to send that money to insurers without congressional approval.
An appeal of that ruling has been on hold since the Trump administration took office, and if they decide to drop the appeal, CSRs would not be paid unless Congress acts.
The Kaiser study assumes the lower court ruling will stand, and Congress will not appropriate the money. In that case, the millions of low-income customers would still pay the same co-pays and deductibles, and the insurers would have to recoup the cost by raising premiums.
The size of the premium hike would depend on what proportion of the market is below 250% of the poverty rate, and what kind of claims history they have.
Kaiser says premiums would go up more in the 19 states that have declined to expand Medicaid because the CSRs help individuals in those states who earn between $11,880 and $16,400. In expansion states, that population is covered by Medicaid.
But overall, Kaiser projects that silver plan premiums would increase about 23%, to an average of $532 a month. Since more than 80% of ACA customers pay a percentage of their income for premiums, the federal government would be on the hook for nearly all of that increase.
And, to the extent that the higher premiums chased unsubsidized customers to bronze or gold tier plans or out of the market entirely, that would make the math even worse.
But how the market would respond could change the impact greatly. If insurers decide the government is too erratic to partner with, and many states have no sellers, the price tag would drop.
Study co-author Gary Claxton said more people could enroll because more people could get a bronze plan for free, or all the news coverage about making Obamacare less generous could drive people away.
"There really is so much uncertainty now. It's pretty hard to say how people would behave," he said.
Even though Trump has suggested that he would drop the appeal in order to force Democrats to the table to fix Obamacare, many major players say the CSRs will stay in place.
In an earnings call Tuesday, Centene Corp. CEO Michael Neidorff said the company "believe(s) there is bipartisan support for cost-sharing reductions." He also said Democrats and Republicans are discussing appropriating the money as part of the spending package to keep the government open.
Claxton said "there's a good chance" that Congress will do that, but added: "I don't know (that) in this climate we would anticipate anything."
Rep. Greg Walden (R-Ore.), chairman of the House Energy and Commerce Committee, said at a town hall last week that cost-sharing subsidies will get paid.
"It was a commitment made by the government to the insurers and the people," the Washington Post quoted Walden saying. "That needs to happen."
In fact, the Obamacare replacement that Walden helped shape preserved the CSRs in the transition through 2020.