As Trump threatens to kill Obamacare subsidies, California preps for legal battle

Following the Senate GOP’s dramatic late-night failure to repeal and/or replace the Affordable Care Act last week, President Trump has floated a familiar Plan B to simply “let Obamacare fail.”

Today California officials responded: “We’ll see you in court.”

This afternoon, state Attorney General Xavier Becerra joined a lawsuit against the federal government, demanding that the Trump administration commit to reimbursing insurance companies that offer plans with reduced copays and deductibles to low-income Americans under the Affordable Care Act. California joins 14 other states and the District of Columbia in the lawsuit.A health worker takes a patient's blood pressure.

Not to be outdone, California Insurance Commissioner Dave Jones also threatened to take the Trump administration to court over the subsidies. “If President Trump continues to insist on not making the cost sharing reduction payments, then I will sue the administration on behalf of consumers in the state of California,” he said at a press conference today. Jones, whose office regulates the state’s insurance markets, also announced that he had allowed health insurance companies to submit two proposed premium hikes for 2018—one with and one without the federal subsidy.

Average rates without the payment were 12.4 percent higher.

“California is not immune to the actions the president has taken destabilizing health insurance markets and we’ve seen that in the filings that have been made public today,” Jones said.

Under the Affordable Care Act, low-income Californians who are not covered by their employer or through Medicaid and who purchase mid-level “silver” plans are eligible for reduced copays and deductibles. The federal government compensates insurance companies for providing these discounts—a reimbursement estimated to cost federal taxpayers $7 billion this year.

In 2014, the House of Representatives sued the Obama Administration for making these payments without specific Congressional authorization. But as California joins this case, currently before the District of Columbia Circuit Court of Appeals, the President is also threatening to simply cut off the payments unilaterally.

Without the federal reimbursement, health market analysts predict that insurance companies would pull out of certain individual insurance marketplaces and raise premiums to make up the cost. The Kaiser Family Foundation, a non-partisan health policy organization based in the Bay Area, estimates that ending reimbursements would increase premiums for affected plans by 19 percent. And because Obamacare premium subsidies are tied to market rates, the foundation estimates that the policy shift would also lead to higher overall federal spending.

President Trump has argued that allowing the Affordable Care Act insurance markets to fail—and in this case, providing a helpful nudge—will force both Democrats and Republicans to negotiate a comprehensive repeal of the controversial health care program. “The subsidies must be eliminated to incentivize members of Congress to keep their promise and repeal Obamacare,” Arizona Congressman Andy Biggs said today.

On Sunday, White House counselor Kellyanne Conway told Fox News that Trump would decide on whether to carry out the payments “this week.”

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