Trump Killing Insurance Subsidies Spikes Covered California Premiums 25%

Irfan Khan/Los Angeles Times via Getty Images

President Donald Trump ‘s decision last week to discontinue the illegal insurance subsidies known as “cost-sharing reductions” means that Covered California healthcare premiums will spike by almost 25 percent in 2018.

The Trump administration announced that it would no longer authorize the payments, which the courts have ruled would be the equivalent of an illegal $10 billion gift to insurance companies, in 2018.

California’s state health insurance agency reacted on Friday by announcing a surcharge of 12.4 percent on its Covered California Silver Plan, its second-least expensive healthcare offering. Given that the Congressional Budget Office estimated the loss of cost-sharing subsidies would increase premium costs by 20 percent, the 11 insurers that signed up to offer Covered California healthcare policies in 2018 will apparently suffer about a 7.6 percent loss.

Although originally part of the Obamacare plan design, Congress never funded the cost-sharing subsidy payments and won a lawsuit last year determining that the payments were unconstitutional. But the court, on request form the Obama administration, allowed the payments to continue while the case was on appeal.

President Trump could have killed this year’s $7 billion in illegal payments on January 20 when he was sworn in, but he chose to try negotiating a comprehensive “repeal and replace” of Obamacare. But after Republican Senator John McCain (R-AZ) and others scuttled the Congressional fix, the Trump administration decided to cancel the $600 million October subsidy payment.

The Trump administration would normally have just dropped the appeal. But on August 1 the U.S. Court of Appeals Court in Washington, DC, allowed 17 states, led by California, to join the case to argue for reversing the lower court decision.

Obamacare was sold to voters on a promise to slash healthcare insurance premiums by $2,500 per family. But mandatory rules and benefits caused premiums to spike by 68 percent between 2010 and 2015, according to the National Association of State Legislatures.

The average cost of healthcare for a family of four in the United States was $17,322 in 2017, the world’s highest average cost. But in highly-regulated California, the average family healthcare premium is an even worse $18,045.

With the tsunami of Obamacare cash flooding into the health insurance industry since 2010, profits more than doubled, and the healthcare stock index rose by 251 percent. The industry’s biggest Obamacare winner was America’s largest health insurer, United Healthcare. With the cost-sharing more than tripling profits since Obamacare passed, United Healthcare (UNH:NYSE) stock is up a stunning 737 percent.

But United Healthcare not only knew how to harvest the Obamacare windfall, it also seemed to understand that with the end of “cost-sharing reductions” fast approaching, Obamacare was about to become a big financial loser. United Healthcare terminated participation in Covered California in 2017, along with 25 of the 33 other Obamacare state exchanges.


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