Fact Check: President Trump's Comments On ACA's Subsidies
MELISSA BLOCK, HOST:
And now we're going to truth squad some of President Trump's latest claims about health care - in particular, what he's said about his decision to stop paying for subsidies under the Affordable Care Act, or Obamacare. The president has called those subsidies bailouts to insurance companies, a windfall. Sarah Kliff joins us for a fact check. She covers health care policy for vox.com. Sarah, good morning.
SARAH KLIFF: Good morning.
BLOCK: And first, why don't you give us a quick review of just how these cost-sharing reduction subsidies work?
KLIFF: Yeah, so these are subsidies for low-income Americans who buy Obamacare to help make their co-payments and deductibles a little bit lower, to make it a little easier to go to the doctor. And these payments have - will continue to be paid by insurance companies, even though the government will not finance them. It is just coming out of insurance companies' own pockets at this point.
BLOCK: So basically, if they get reimbursed by the federal government, that is a wash? They're getting just made up for what they already paid out?
KLIFF: Yeah, so the federal government, you know, makes these payments each month, and insurance companies, in turn, help lower the co-payments and deductibles of their low-income consumers. What President Trump is changing is he's not going to make those payments, so insurance companies have no one on the back end, you know, sending them the payment to make up for that spending.
BLOCK: OK. So when President Trump calls those payments a gift to insurance companies, are they a gift?
KLIFF: I would disagree that they are a gift. You know, for one thing, they are going not necessarily to the insurance companies. They're ultimately going to low-income Americans to help them afford their co-payments and afford their deductibles. So, you know, on that level, they don't seem like a bailout or a gift to the insurance companies. They are required by the law. The law requires these subsidies to be made. So they're really - you know, I see them as part of the Affordable Care Act and not necessarily a bailout.
BLOCK: The president has also said, Sarah, that the insurance companies, in his words, made a fortune with Obamacare. Is that true? What do the numbers show?
KLIFF: The numbers are a lot more mixed. The best data on this probably comes from the nonprofit Kaiser Family Foundation, which looks at quarterly margins - so how much insurance companies have each quarter leftover after paying out all those claims. In 2014 and 2015, insurance companies had a quarterly margin of just about $20 a person. That's not a ton of money. It's gone up as the Obamacare markets have stabilized.
In 2016, it was about $90 a person, so it's definitely getting better. But the insurance markets - you know, I've covered them since they launched. And they've really been a very rocky experience for insurance companies financially. They didn't know how to price at first. People were sicker than they expected. It's only in the past year that insurance companies have made decent profits there, but I think of them as a mixed bag when it comes to financial performance.
BLOCK: Decent profits, which raises the question - if the insurance companies are losing the federal payments, they began compensating by jacking up the premiums for other people - right? - raising those premiums a lot - in some cases by double digits. Couldn't the insurance companies just absorb the costs themselves, cut into their profits but not pass it along to consumers?
KLIFF: Yeah, so one of the things I've learned as a health care reporter is insurance companies tend to have relatively low profit margins, usually in the 3 to 4 percent range. So there definitely is some space. But one of the things that surprised me a little bit is state regulators often are the ones saying, you have to make those increases. They're really worried that insurance companies might get hit with a big claim and not have enough money to pay for it.
So they want to make sure that insurance companies are getting enough revenue from their premiums to cover that loss, to make sure they can actually pay out claims. The worst-case scenario for a state regulator is to have an insurance company that just can't pay its medical bills for patients.
BLOCK: That's Sarah Kliff. She's a senior policy correspondent for vox.com and host of the podcast The Impact, which covers health care policy. Sarah, thanks so much for being with us.
KLIFF: Yeah, thanks for having me.
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