Steve Bannon admits Trump is intentionally trying to ‘blow up’ health insurance markets

America first!

Former White House Chief Strategist Steve Bannon told a conservative crowd at the Values Voter Summit on Saturday that Donald Trump cut off certain payments to insurers as part of an intentional effort to tank certain health insurance markets.

“Then you had Obamacare,” Bannon said as part of a list of so-called Trump accomplishments that Bannon thought would please the crowd, “not going to make the CSR payments. That’s going to blow that thing up — gonna blow those exchanges up, right?”

The “CSR payments” Bannon refers to are payments that reimburse health insurers for the cost of reducing deductibles, co-payments and other expenses for people with modest incomes. Trump announced on Thursday night that he was ending these payments — an act that potentially sends insurers in the Obamacare exchanges into turmoil just as they are ramping up for another enrollment season.

Yet, while Trump’s action is likely to cost the United States Treasury a great deal of money, it is unlikely to “blow up” the Obamacare exchanges. To the extent that Bannon’s statement reflects the inner thinking of the Trump White House, the Trump White House appears to lack a real understanding of how the various pieces of the Affordable Care Act work together.

According to the Congressional Budget Office, cutting off CSR payments will have a fairly minor impact on the number of people with insurance. This number will drop by about 1 million in 2018, but it will actually gain back that million and grow by another million by 2020. These fluctuations will come with a very high price tag, however, “$194 billion from 2017 through 2026.”

The reason for this strange result is the complicated way that the Affordable Care Act calculates tax credits that help most people in the Obamacare exchanges to purchase health insurance. Plans in the exchanges are categorized as “Bronze,” “Silver,” “Gold,” or “Platinum,” with platinum plans offering the most generous benefits and bronze plans the stingiest. The CSR payments are only paid to silver plans, and they help reduce the price of insurance in the silver market.

Meanwhile, the value of the tax credits are also tied to the price of silver plans — so as silver plan premiums spike, as they will do now that Trump has cut off CSR payments, the tax credits gain value as well. The practical effect is that it will now be less expensive for people who receive Obamacare tax credits to buy bronze, gold, or platinum plans, as the government will pay a larger share of their premiums.

To be sure, there will still be losers now that Trump has cut of the CSR payments. People who make too much money to qualify for tax credits could see higher premiums. And taxpayers are now on the hook for nearly $200 billion in additional spending that could have been avoided if Trump had kept the CSR payments alive.

But, if CBO is correct, cutting them off is unlikely to “blow up” the health exchanges.