3 Reasons Health Insurers Won’t Lose Federal Subsidies

The fate of the U.S. health care system and the Affordable Care Act marketplace is as uncertain as ever following President Donald Trump’s threats to withhold federal cost-sharing reduction subsidies, or CSRs, from insurers.

But while eliminating CSR payments could be a crippling blow to the health care marketplace, some analysts believe Trump may be powerless to follow through with his threat.

Trump tweeted about eliminating “bailouts” from insurance companies on July 28.

“At the time, we viewed the president’s attempt to use CSR payments as leverage in attempting to revive ACA repeal efforts as strong reason to believe August CSR payments are under significant threat of being withheld,” Height Securities analyst Stefanie Miller says in a research note on Friday. But there are a number of events that indicate the payments will be continue, she says.

Congress would step in. First, if the president were to withhold CSR payments to insurers, Congress would likely step in and appropriate the payments. In fact, the Senate Committee on Health, Education, Labor and Pensions has already planned to pass bipartisan legislation allowing Congress to make any withheld CSR payments for at least one year.

The courts would have their say. But even without the threat of being undercut by Congress, Miller says Trump is facing major legal backlash in the courts. On Tuesday, the U.S. Court of Appeals for the District of Columbia Circuit ruled that individual states could step in and sue the federal government for withholding CSR payments. Insurance companies would likely step in with their own lawsuits as well.

In April, the health care group America’s Health Insurance Plans sent a letter to Congress saying “the most critical action to help stabilize the individual market for 2017 and 2018 is to remove uncertainty about continued funding for cost sharing reductions.” Cigna Corp. (NYSE: CI), Humana (HUM) and Anthem (ANTM) are among the group’s members.

There’s a new chief of staff. Finally, Miller hopes the president’s new chief of staff, General John Kelly, will encourage Trump to think less about politics and more about policy when it comes to health care reform. A less threatening tone might go a long way in easing investors’ fears.

Amid all the uncertainty about the future of the U.S. health care system, health care stocks have performed…

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