Cutting Obamacare subsidies would see insurance premiums rise by 20 per cent, Congressional Budget Office warns

The President has repeatedly threatened to cut the current $7 billion 

Mythili Sampathkumar
New York
Tuesday 15 August 2017 23:39 BST
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Republican senators like John McCain said they would not support any legislation to repeal and replace Obamacare unless it was guaranteed to go to conference with the House of Representatives 27 July 2017
Republican senators like John McCain said they would not support any legislation to repeal and replace Obamacare unless it was guaranteed to go to conference with the House of Representatives 27 July 2017 (Chip Somodevilla/Getty Images)

Insurance premiums would increase by 20 per cent for people if Donald Trump cut the Obamacare subsidies currently offered to low-income customers, the nonpartisan Congressional Budget Office (CBO) has warned.

The subsidy - a total of approximately $7bn (£5.4bn) this year - helps insurance companies offset the costs of providing coverage to people who would normally not be able to afford those plans.

More than 7 million Obamacare customers qualify for the current subsidies.

House of Representatives Democrats requested the CBO analysis which found that Mr Trump's repeated threats to cut the subsidy amid the debate over replacing Obamacare with a new Republican-drafted plan would also increase the national deficit by $194bn ((£151bn) through 2026, according to Politico.

In this system the government provides payments to insurance companies and they pass on the "savings" to customers.

If these payments ended, some insurance companies would likely withdraw from Obamacare marketplaces. They would not be able to insure lower-income Americans, lowering the number of customers in a particular pool of insured people.

That would leave about five per cent of Americans with no options for health insurance on Obamacare exchanges, places where the pool would be too small for insurers to justify costs.

Insurers are projected to receive $10bn (£7.76bn) in subsidies in 2018. They must keep offering the discounts by law, even if they do not get the money promised by the federal government to subsidise those discounts.

The CBO also estimated that there would be an additional 1 million uninsured in 2018 than there are currently if Mr Trump ends the subsidy payments.

However, this is likely to change by 2020 should Mr Trump go through with his politically unpopular plan.

The report stated that more people would be able to purchase plans without the subsidy by then, however this may not be applicable to same low-income population that would lose insurance in 2018.

White House spokesman Ninio Fetalvo told CNBC that "regardless of what this flawed report says, Obamacare will continue to fail with or without a federal bailout".

The Senate is scheduled to hold hearings on the Obamacare replacement the first week of September after the bill failed to pass ahead of the August recess.

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