If Trump kills subsidies, Covered California has a plan

Covered California’s governing board Thursday unanimously approved a fallback plan in case President Trump does away with subsidies that help certain consumers with their out-of-pocket medical costs.

The state exchange will now require insurers to create health plans outside of Covered California that would provide the same discounts on out-of-pocket costs that consumers get now with the so-called cost-sharing subsidies. To make up for not receiving the subsidies, insurers would be allowed to charge higher premiums - from 15 to 17 percent higher, according to Covered California Executive Director Peter Lee. 

"This is the best-worst option," he says. "We need something that health plans can rely upon throughout 2018."

Half a million Californians get the cost-sharing subsidies under the Affordable Care Act. Trump has continually threatened to drop the government's appeal of a court ruling that invalidated the subsidies. Insurers and regulators say the uncertainty over the subsidies' future threatens the stability of insurance exchanges such as Covered California.

The insurance industry and consumer advocates expressed support for the plan Thursday, even as they characterized it as less-than-optimal. All agreed with Lee that the state has to take steps to address the uncertain future of health policy.

"Without certainty, some plans might not participate at all in 2018," says Lee.

Covered California is already in talks with the U.S. Department of Health and Human Services about the fallback plan, since the federal agency will have to sign off on the idea, he says.

The state exchange is in the midst of negotiating insurers' premiums for next year. It had instructed insurance firms to submit two sets of possible rates, with one based on the assumption that the Trump administration does away with the cost-sharing subsidies.

Last week the exchange said that if the federal government doesn't clarify its position on the subsidies by mid-August, it will tell insurers to charge higher premiums to account for the uncertainty.

Questions about whether or how Congress will repeal Obamacare have sent shudders throughout the insurance industry, causing firms to pull out of some state insurance exchanges. That has not happened so far in California.