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White House to halt health insurance subsidies

President Trump signs an executive order on health care the White House Thursday.
Jabin Botsford/The Washington Post
President Trump signs an executive order on health care the White House Thursday.

WASHINGTON — President Trump will scrap subsidies to health insurance companies that help pay out-of-pocket costs of low-income people, the White House said late Thursday.

His plans were disclosed hours after the president ordered potentially sweeping changes in the nation’s insurance system, including sales of cheaper policies with fewer benefits and fewer protections for consumers.

The twin hits to the Affordable Care Act — on successive days — could unravel Barack Obama’s signature domestic achievement, sending insurance premiums soaring and insurance companies fleeing from the health law’s online marketplaces. After Republicans failed to repeal the health law in Congress, Trump appears determined to dismantle it on his own.

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Without the subsidies, insurance markets could quickly unravel. Insurers have said they will need much higher premiums and may pull out of the insurance exchanges created under the Affordable Care Act if the subsidies were cut off. Known as cost-sharing reduction payments, or CSRs, the subsidies were expected to total $9 billion in the coming year and nearly $100 billion in the coming decade.

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“The government cannot lawfully make the cost-sharing reduction payments,” the White House said in a statement.

It concluded: “Congress needs to repeal and replace the disastrous Obamacare law and provide real relief to the American people.”

Trump’s decision to halt the subsidy amounts to a rebuke to members of Congress from both parties who have urged him to continue the payments.

The move also came hours after officials at the Massachusetts’ health insurance exchange said they would shield consumers from unusually high rate increases in 2018.

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Under that announcement, rates would rise for people who buy insurance through the state’s Health Connector, but less sharply than feared: 8.7 percent, on average.

The decision to halt the subsidies would likely prompt state officials to reevaluate that rate hike. Officials at the Connector warned last week that premiums for individuals could soar an average of 24 percent next year if the Trump administration ended the subsidies.

The president had raised the possibility of eliminating the subsidy with Republican senators at a White House meeting several months ago. At the time, one senator told him that the Republican Party would effectively “own health care” as a political issue if the president did so.

By late Thursday night, a backlash against Trump — including from fellow Republicans — appeared imminent as lawmakers voiced concern over how ending the subsidies would affect their constituents.

“Cutting health care subsidies will mean more uninsured in my district,” Representative Ileana Ros-Lehtinen, Republican of Florida, wrote on Twitter. She added that Trump “promised more access, affordable coverage. This does opposite.”

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Democrats immediately reacted with outrage, warning that Trump was inflicting harm on the nation’s health care system.

Senator Richard J. Durbin, Democrat of Illinois, wrote on Twitter, “The President is destroying health care to make a political point.”

The future of the payments has been in doubt because of a lawsuit filed in 2014 by House Republicans, who said the Obama administration was paying the subsidies illegally. Judge Rosemary M. Collyer of the US District Court in Washington agreed, finding that Congress had never appropriated money for the cost-sharing subsidies.

The Obama administration appealed the ruling. The Trump administration has continued the payments from month to month, even though Trump has made it clear he detests the payments and sees them as a bailout for insurance companies.

This summer, a group of states, including New York, Massachusetts, and California, were allowed to intervene in the court case over the subsidies. The New York attorney general, Eric T. Schneiderman, said on Thursday night that the coalition of states “stands ready to sue” if Trump cuts off the subsidies.

“I will not allow President Trump to once again use New York families as political pawns in his dangerous, partisan campaign to eviscerate the Affordable Care Act at any cost,” Mr. Schneiderman said.

Health insurers, consumer advocates, and many politicians had been pushing for legislation to guarantee the payment of the subsidies and help stabilize insurance markets. Massachusetts Governor Charlie Baker was among five governors to testify before US senators last month and urge them to keep the payments flowing.

The decision to end the subsidy came on the heels of Trump’s executive order that includes sales of cheaper policies with fewer benefits and protections for consumers than those mandated under the Affordable Care Act.

The president’s plan, an 1,100-word directive to federal agencies, laid the groundwork for an expanding array of health insurance products, mainly less comprehensive plans offered through associations of small employers and greater use of short-term medical coverage.

It was the first time since efforts to repeal the landmark health law collapsed in Congress that Trump has set forth his vision of how to remake the nation’s health care system using the powers of the executive branch.

Priyanka Dayal McCluskey of Globe staff contributed to this report.