What Trump's decision to scrap cost-sharing subsidies means for MinnesotaCare

The health program for low-income Minnesotans gets $120M from cost-sharing reductions.

In a late night announcement, the White House confirmed it would be ending the cost-sharing reduction payments in a move that could have serious implications for the MinnesotaCare program.

Cost-sharing reductions (or subsidies) created under the Affordable Care Act, sees $7 billion a year paid to insurance companies to keep premiums affordable for low-income Americans who don't qualify for Medicaid.

The subsidy program was challenged, successfully, in court by Republicans in Congress during the Obama era, but was allowed to continue pending an appeal from the White House.

With President Trump now in charge, he announced Thursday night that he would be scrapping cost-sharing reductions altogether.

What does this mean for MinnesotaCare?

MinnesotaCare is a state-run health program providing healthcare cover for low-income Minnesotans who earn too much to qualify for Medicaid.

Unlike in other states where cost-sharing reduction funding is paid directly to insurers, the states of Minnesota and New York run Basic Health Programs where the funding is paid to the state, which in turn offers its own subsidized health plans (ie. MinnesotaCare).

Minnesota uses that money to compensate health insurers for smaller out-of-pocket costs and deductibles for consumers. Up to 100,000 Minnesotans currently use MinnesotaCare.

MinnesotaCare gets 85-95 percent of its funding from the federal government, of which $120 million comes from cost-sharing reductions – funding that will presumably disappear in the future following Trump's announcement.

It's one of two major funding threats to MinnesotaCare, with the state still in dispute with the federal government over $369 million in federal funding it wants to withdraw in exchange for Minnesota pushing ahead with its plan to subsidize health premiums in 2018 through reinsurance.

Minnesota's attorney general Lori Swanson recently said ending MinnesotaCare would lead to higher premiums for the poor, more uninsured people, higher costs to states, and insurance companies potentially leaving health exchange markets altogether.

It's not clear at this stage how the ending of cost-sharing reductions will have an impact on those who use it to reduce their premiums when buying private health plans from MNsure.

Cost-sharing subsidies are available to single people earning up to $30,150 and families of four with incomes of up to $61,500 provided they choose a "Silver" plan through the health exchange.

The Star Tribune reports that just under 12,000 people with individual insurance policies were benefiting from cost-sharing reductions in April of this year.

While there are fears of higher premiums with the scrapping of cost-sharing reductions, on Thursday Trump signed an executive order that he argues will help reduce premiums and increase choice for Americans. 

The order will give employers the ability to band together to offer group health plans and allow insurance companies to sell plans across state borders.

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