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Short Analysis
May 2018

The Trump Tax on Health Insurance: CBO Report Shows 31-54% Premium Spike

On May 23, the nonpartisan Congressional Budget Office (CBO) released its latest analysis of health insurance coverage and costs. Much of the report’s media coverage has focused on the projected 15 percent premium increase for 2019 as a measure of the damage being done by the Trump administration and its Republican allies in their ongoing campaign to sabotage health insurance markets. In truth, this sabotage has imposed a much higher cost on millions of families in America.

Two-year premium increases range from 31 percent to 54 percent, depending on metal level

CBO found that, for so-called “benchmark” coverage provided by silver-level plans, average premiums rose by 34 percent in 2018 and are projected to rise an additional 15 percent in 2019. Over a two-year period, that amounts to a 54 percent total premium increase. In dollar terms, that equals $1,833, $2,683, and $5,495, for the average 21-year-old, 45-year-old, and 64-year-old, respectively (table 1). To illustrate the impact of those costs on household budgets, single individuals earning $50,000 a year are ineligible for federal financial assistance and must pay these “Trump tax” costs.

Premium increases vary by metal level. According to CBO, the average cost of bronze and gold plans rose by 17 and 18 percent, respectively, in 2018. Based on CBO cost projections, the average premium increases for bronze and gold plans in 2019 will be 14 percent and 11 percent, respectively. Over a two-year period, that amounts to a 33 percent total increase for bronze plans and a 31 percent total increase for gold (table 1).

Table 1. Premium increases for individual-market coverage, by metal level and age: 2018-2019

Metal level Percentage increases Dollar increase in average premiums, 2017-2019, by age
2017-2018 2018-2019 2017-2019 Age 21 Age 45 Age 64
Bronze 17% 14% 33% $898 $1,344 $2,759
Benchmark
silver
34% 15% 54% $1,833 $2,683 $5,495
Gold 18% 11% 31% $1,350 $1,937 $4,001

Source: CBO 2018. Notes: For all three metal levels, CBO estimated premium increases over a 10-year period. CBO estimated the one-year increase from 2018 to 2019 only for silver benchmark plans. To derive a 2019 estimated premium increase for bronze and gold plans, we multiplied (1) the 15% premium increase CBO projected for benchmark silver plans in 2019 by (2) the ratio of (a) CBO’s projected 10-year premium increase for bronze and gold plans to (b) CBO’s projected 10-year increase for benchmark silver.

7 million Americans are already paying this “Trump Tax”

These premium increases apply to people who buy their own insurance, without help from an employer or the federal government. CBO estimates that, both on and off health insurance marketplaces, 7 million people obtain such unsubsidized coverage today and so will feel the full force of skyrocketing premiums. CBO expects this number to decline by 1 million in later years, since fewer people will be able to afford insurance after premiums increase in 2019.

Sabotage of American health insurance markets is the primary culprit

Of course, not all cost increases result from policy choices that have deliberately destabilized the individual market. But CBO explained that most of the premium increases estimated for 2018 and 2019 resulted from the following factors:

  • The Trump administration’s decision to stop paying insurance companies for cost-sharing reductions furnished to low- and moderate-income consumers;
  • Insurers’ ongoing and continuing uncertainties about changes to the ground rules governing the individual market; 
  • Insurers’ uncertainties about enforcement of individual mandate penalties for consumers;
  • The federal tax law’s complete elimination of all such enforcement, starting in 2019; and
  • The Trump administration’s proposed regulations permitting the sale of largely unregulated short-term, limited duration insurance and association health plans

According to CBO, these factors increased premiums in two ways: insurers are raising premiums in direct response to the risk that numerous younger and healthy adults will leave the individual market due to sabotage; and that risk is leading some insurers to abandon the individual market, causing a further premium spike that results from reduced competition in many counties. 

The bigger picture

Based on CBO estimates, 8 million people in America who receive individual-market coverage are shielded from this “Trump tax” because they benefit from the ACA’s premium tax credits. But 7 million other people are not protected and will be forced to pay significantly more for insurance. 

In sum, the CBO report makes an important clarification about the main drivers of this eminently avoidable premium increase: Mean-spirited policy choices that have driven premiums sky-high since January 2017, imposing large and growing financial burdens on millions of hard-working families in America.