6 critical ways Trump’s cuts in Obamacare subsidies could impact you

President Trump’s promised rollback of Obamacare has officially begun. But what does it all mean? And will it affect you?

The federal government will cut billions of dollars in health-care subsidies to low-income households that were introduced under Barack Obama’s Affordable Care Act, the White House announced Thursday evening. These $7 billion in “cost-sharing subsidies” are the payments the government makes to health insurance companies to offset the discounts on co-payments that low-income consumers have received under Obamacare. The subsidies repay health insurers for the higher cost of the “silver plan” through HealthCare.gov — the individual insurance marketplace operated by the federal government and set up under Barack Obama.

Also see: What the fate of Obamacare means for people who hope to retire early

There was immediate backlash to the move, with some lawmakers saying it will ultimately hurt Americans. “It is a spiteful act of vast, pointless sabotage leveled at working families and the middle class in every corner of America,” Senate Minority Leader Chuck Schumer, a Democrat said. “Trump will try to blame the Affordable Care Act, but this will fall on his back and he will pay the price for it.” Ileana Ros-Lehtinen, a Republican congresswoman from Florida, tweeted, “POTUS promised more access, affordable coverage. This does opposite.”

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But the White House said there was no justification in continuing the subsidies. “The bailout of insurance companies through these unlawful payments is yet another example of how the previous administration abused taxpayer dollars and skirted the law to prop up a broken system,” White House Press Secretary Sarah Huckabee Sanders said in a statement late Thursday. And President Trump has called the subsidies a “bailout” for the insurance industry.

Here are six ways the cuts in Obamacare subsidies will impact consumers:

The cuts in subsidies may actually hit the middle class the most

Insurers already put insurance premiums up 20% this year in anticipation of the President’s decision to end these subsidies. However, in several states, including Indiana, insurance companies spread their rate increases, so middle-class people on individual plans will likely see a double-digit increase in their premiums next year. “People who don’t qualify for premium subsidies for cost-sharing reductions, but are also in the individual market because they don’t have employer-sponsored coverage — early retirees who aren’t yet eligible for Medicare or higher-earning freelancers — will be negatively affected by higher premium costs,” Susan Nash, partner at Winston & Strawn LLP in Chicago, Ill.

A lot of insurers priced their 2018 plans, knowing they wouldn’t get paid. Low- and middle-income people won’t feel any of this increase.

Karen Pollitz, senior fellow at the Kaiser Family Foundation

Premiums for those actually hit by the subsidy cuts will be unchanged

Those on silver plans — the cheapest mid-level plan affected by the subsidy cuts — won’t feel this massive rate increase after the cut in subsidies. “A lot of insurers priced their 2018 plans, knowing they wouldn’t get paid,” said Karen Pollitz, senior fellow at the Kaiser Family Foundation, a nonprofit, private foundation based in Washington, D.C. “So low- and middle-income people — those who are four times the poverty level, those who have the benchmark silver plan or a cheaper — won’t feel any of this increase. The tax credit will cover it. It’s a gift card that’s tied to the cost of the plan.” People who live below the poverty level who live in states that expanded Medicaid will be covered by that government plan, but there are around 3 million people who are uninsured because they don’t live in states that didn’t expand Medicaid.

Also see: Why John McCain ignored Trump plea and shot down Obamacare repeal

In a report released earlier, the Congressional Budget Office said that cutting Obamacare’s subsidies could lead to an increase in “gross” premiums by 20% next year and 25% by 2020. But premium tax credits will also go up, which some experts have said will cost even more than the subsidies themselves. Ultimately, however, cutting the subsidies will drive up premiums as insurers attempt to cover the cost of the reductions, according to Timothy Jost, professor at the Washington and Lee University School of Law, and contributor to the Health Affairs Blog.

More people could end up without any individual insurance…

What’s more, the number of people without insurance would increase, resulting in 5% going without insurance, the CBO found, as insurance companies exit the health-care market. “About 5% of people live in areas that would have no insurers in the non-group market in 2018,” it said. (“Non-group” refers to those people who don’t get their health insurance from their employer or the government.) Insurance companies, Jost wrote, “are still subject to state laws on market withdrawal, which limit their ability to do so. They may not terminate their exchange enrollees unless they fail to pay their premiums, which many likely would do once an insurer left the exchange and premium tax credits were no longer available.”

‘We’re definitely going to see health care-related bankruptcies.’ Healthy people will be fine, so long as they aren’t diagnosed with a new condition in the future or get into an accident.

Carolyn McClanahan, a physician and a financial planner with Life Planning Partners

…and those that lose insurance could even end up going bankrupt

The likely increase in the number of people without insurance could have a devastating effect on their personal finances. “We’re definitely going to see health care-related bankruptcies,” said Carolyn McClanahan, a physician and a financial planner with Life Planning Partners, a financial planning firm based in Jacksonville, Fla. How people fare without insurance will ultimately come down to their health: Healthy people will be fine, so long as they aren’t diagnosed with a new condition in the future or get into an accident.

Also see: Nearly one-quarter of Americans are one emergency away from financial disaster

Insurers could deny more claims next year — even for employer plans

Insurance companies have already set their policy rates for next year and cannot change them, McClanahan said. As a result, insurers will have to bear the higher costs of these health-care premiums in 2018 without the subsidies and will need to look for ways to offset them. “This is speculation, but what they may try to do is clamp down on what they approve in service,” McClanahan said. “That’s going to hurt the doctors and the patients.” If insurance providers are more stingy in terms of what treatments they pay for, doctors could earn less money while patients choose to forego treatments rather than having to pay out of pocket.

People will need to become more informed health-care consumers

The Trump administration’s choice does not address the root cause of rising premiums, McClanahan said, which is the increasing costs of treatments and health-care services. The subsidies cut represents a step toward the GOP’s goal of reducing the government’s role in health care. If these changes continue, consumers will have to play a bigger part. “You’ve got to become an empowered patient,” she said. “Question your doctors when they want to order tests or put you on medications. Ask for cheaper alternatives.”