Insurance Companies Say Premiums May Increase After Government Subsidies Stop

VPM | By Alison Kodjak

Published October 13, 2017 at 9:28 PM EDT

Updated September 13, 2024

KELLY MCEVERS, HOST:

In a tweet earlier today, President Trump called the Affordable Care Act insurance markets a broken mess. Most economists say that’s an exaggeration and that the markets, in fact, are working. Nevertheless, Trump took a step late last night that could propel the Obamacare markets to indeed collapse. He announced the government would immediately stop subsidy payments to insurance companies, payments that are legally required under the ACA. To help make up the difference, many insurance companies say they will have to increase premiums next year.

With us now to talk about this latest action by the president and how it might impact consumers is NPR health policy correspondent Alison Kodjak. Hey there.

ALISON KODJAK, BYLINE: Hey there, Kelly.

MCEVERS: So the president says these payments amount to a bailout of insurance companies. I want you to explain these payments. What exactly are they?

KODJAK: So they’re known as cost-sharing reduction subsidies, which is a mouthful, but you hear people referring to them as CSRs. And under the Affordable Care Act, insurance companies have to give the lowest-income people discounts on deductibles and co-payments. And the law says the government will reimburse the companies for that. And that’s what these payments are.

MCEVERS: Right. So these are subsidies for lower-income people basically.

KODJAK: Yes.

MCEVERS: OK, so those payments are going to stop. How will that affect people?

KODJAK: So the people that get these discounts aren’t going to lose them. The insurance companies are required by law to offer the discounts. So people have these policies, will still get their low deductibles and their low co-payments. But the insurance companies aren’t just going to take that loss. So they have said – and when they file rates with their states, which they have to do under the Affordable Care Act, they’ve said they’ll raise their premiums to make up for that lost income.

MCEVERS: Does that mean they will go up for everyone?

KODJAK: Well, not exactly. The top-line premiums will be higher. But again, the Affordable Care Act law, it’s really complex. And it tries to protect people from these fluctuations in insurance rates. So in addition to these discounts that we just talked about, most people who buy insurance on the ACA exchange also get a tax credit to reduce the cost of their premiums. And those credits are designed to keep those costs stable. So if premiums rise, the tax credits rise, too. And so that means, like, if I pay $200 a month for my insurance with the help of a tax credit, next year I’ll probably still just pay $200 even if the advertised premium’s higher. And the government’s going to have to pick up the tab.

MCEVERS: Who would this affect the most?

KODJAK: Well, you know, the people who are most likely to see an increase in their costs are the people who don’t actually qualify for those tax credit subsidies on their premiums. That means people who have relatively high incomes – a family of four with an income of about $100,000. That’s where that starts. And they will have to absorb the full premium increase because they don’t get any sort of tax credit at all.

MCEVERS: And then what about the cost to the government? I mean, that sounds like it’s the goal here – right? – is the government pays less.

KODJAK: It would sound like that. But the Congressional Budget Office, which analyzed these things for Congress, they say this is actually going to cost the government more. And that’s the irony. By stopping these payments, which are about $7 billion a year in total, the president could increase the cost because those tax credits go to so many more people that if premiums go up across the board, they’re going to be paying out a lot more in tax credits. So it’s a little bit of a miss on the budget, and it could hurt a lot of middle-class families.

MCEVERS: Alison Kodjak, thank you so much.

KODJAK: Thanks, Kelly. Transcript provided by NPR, Copyright NPR.

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Alison Kodjak

Alison Fitzgerald Kodjak is a health policy correspondent on NPR's Science Desk.

Her work focuses on the business and politics of health care and how those forces flow through to the general public. Her stories about drug prices, limits on insurance, and changes in Medicare and Medicaid appear on NPR's shows and in the Shots blog.

She joined NPR in September 2015 after a nearly two-decade career in print journalism, where she won several awards—including three George Polk Awards—as an economics, finance, and investigative reporter.

She spent two years at the Center for Public Integrity, leading projects in financial, telecom, and political reporting. Her first project at the Center, "After the Meltdown," was honored with the 2014 Polk Award for business reporting and the Society of Professional Journalists Sigma Delta Chi award.

Her work as both reporter and editor on the foreclosure crisis in Florida, on Warren Buffet's predatory mobile home businesses, and on the telecom industry were honored by several journalism organizations. She was part of the International Consortium of Investigative Journalists team that won the 2015 Polk Award for revealing offshore banking practices.

Prior to joining the Center, Fitzgerald Kodjak spent more than a decade at Bloomberg News, where she wrote about the convergence of politics, government, and economics. She interviewed chairs of the Federal Reserve and traveled the world with two U.S. Treasury secretaries.

And as part of Bloomberg's investigative team, she wrote about the bankruptcy of General Motors Corp. and the 2010 Gulf Oil Spill. She was part of a team at Bloomberg that successfully sued the Federal Reserve to release records of the 2008 bank bailouts, an effort that was honored with the 2009 George Polk Award. Her work on the international food price crisis in 2008 won her the Overseas Press Club's Malcolm Forbes Award.

Fitzgerald Kodjak and co-author Stanley Reed are authors of In Too Deep: BP and the Drilling Race that Took It Down, published in 2011 by John Wiley & Sons.

In January 2019, Fitzgerald Kodjak began her one-year term as the President of the National Press Club in Washington, DC.

She's a graduate of Georgetown University and Northwestern University's Medill School of Journalism.

She raises children and chickens in suburban Maryland.

See stories by Alison Kodjak