After Republicans repeatedly failed to repeal the Affordable Care Act in Congress, President Donald Trump's administration took another route.

On October 12, 2017, the administration announced that the federal government would stop making cost-sharing reduction payments, commonly known as CSRs, to insurance companies participating in the Affordable Care Act marketplaces.

The payments helped compensate insurers for providing lower deductibles, copayments and other out-of-pocket costs to qualifying lower-income Americans.

The administration argued that the payments were unlawful because Congress had never specifically appropriated money for them.

But eliminating the payments did not eliminate the insurance companies' obligation to provide the discounts.

That distinction would prove enormously important.

Insurers still had to reduce costs for eligible customers. They simply would no longer receive the direct federal reimbursements that had helped pay for those reductions.

The result was an unusual consequence:

Rather than making Obamacare cheaper for the federal government, ending the payments helped drive up insurance premiums and increased spending on another form of federal subsidy.

What Were Cost-Sharing Reductions?

The Affordable Care Act provided two major forms of financial assistance to people purchasing coverage through its insurance marketplaces.

The first was the premium tax credit, which helped eligible consumers pay their monthly insurance premiums.

The second was the cost-sharing reduction.

Cost-sharing reductions helped lower-income consumers with the expenses they faced when they actually used their insurance.

That could mean smaller deductibles.

Lower copayments.

Lower coinsurance.

And lower maximum out-of-pocket costs.

The assistance was generally available to qualifying consumers with incomes between 100 and 250 percent of the federal poverty level who enrolled in Silver-level marketplace plans.

Insurance companies were required by law to provide those reduced costs.

The federal government, in turn, had been reimbursing insurers for providing them.

That reimbursement was what Trump stopped.

A Long-Running Legal Dispute

The controversy over the payments had begun before Trump became president.

House Republicans sued the Obama administration, arguing that although the Affordable Care Act authorized cost-sharing reductions, Congress had never enacted the specific appropriation necessary to fund the reimbursements to insurers.

A federal district judge agreed with the House in 2016 but allowed payments to continue while the case was appealed.

When Trump entered office, his administration inherited both the payments and the lawsuit.

For months, insurers wondered whether the administration would continue making the reimbursements.

That uncertainty itself became a problem as companies attempted to determine what premiums they needed to charge for the following year.

Then, on October 12, the administration made its decision.

The payments would stop.

The ACA Had Survived Congress

The timing was significant.

Republicans had spent much of 2017 attempting to fulfill their longstanding promise to repeal and replace Obamacare.

The House passed the American Health Care Act in May.

But repeal legislation repeatedly failed in the Senate.

The most dramatic defeat came in July, when Senator John McCain joined Republican Senators Susan Collins and Lisa Murkowski in voting against the so-called “skinny repeal.”

Another Republican effort, the Graham-Cassidy proposal, collapsed in September without receiving a final Senate vote.

After nearly nine months of Republican control of the White House and both chambers of Congress, the Affordable Care Act remained law.

Trump was openly frustrated.

The administration increasingly turned toward executive authority to reshape portions of the health-care system without waiting for Congress.

Ending the cost-sharing payments became one of its most consequential actions.

Insurers Still Had to Provide the Discounts

Stopping the federal payments did not repeal the Affordable Care Act's requirement that qualifying customers receive cost-sharing reductions.

Insurance companies still had to provide them.

That left insurers responsible for billions of dollars in costs that the federal government had previously reimbursed.

They had to find another way to pay for them.

For many insurers, the solution was straightforward:

Raise premiums.

In particular, insurers increasingly placed the additional cost onto Silver plans, because those were the plans through which cost-sharing reductions were provided.

The practice became known as “Silver loading.”

That produced another consequence the administration could not avoid.

Higher Premiums Meant Larger Federal Subsidies

Under the Affordable Care Act, premium tax credits were tied to the cost of marketplace insurance.

When benchmark Silver-plan premiums increased, federal premium subsidies generally increased as well for eligible customers.

That meant the government could stop sending one kind of payment to insurance companies only to spend more money through another part of the Affordable Care Act.

The Congressional Budget Office had examined the possibility before Trump acted.

Its August 2017 analysis projected that ending the CSR reimbursements would cause Silver-plan premiums to rise substantially because insurers would still be legally obligated to provide the reductions.

The higher premiums would then produce larger federal premium tax credits.

Under the assumptions used in that analysis, CBO estimated that terminating the payments would increase federal deficits rather than reduce them.

It was one of the more counterintuitive outcomes of the administration's effort to weaken the Affordable Care Act.

Who Actually Felt the Increase?

The effects were also complicated for consumers.

People receiving premium tax credits were partially insulated from premium increases because their federal subsidies generally increased along with benchmark premiums.

In some cases, the unusual pricing dynamics even created comparatively inexpensive Bronze or Gold plans for subsidized consumers.

But customers who earned too much to qualify for premium assistance did not receive the same protection.

If their premiums increased, they could be responsible for paying the higher price themselves.

The administration had stopped payments to insurance companies.

The underlying costs had not disappeared.

They had simply moved elsewhere in the system.

Trump Continues His Fight Against Obamacare

The decision reflected Trump's broader approach to the Affordable Care Act after congressional repeal failed.

Trump had repeatedly described Obamacare as a disaster and predicted that the system would eventually collapse.

Critics accused the administration of attempting to make that prediction come true by increasing uncertainty and undermining the marketplaces.

The administration rejected that characterization.

Officials argued that they were ending payments that lacked a valid congressional appropriation and that Congress — not the executive branch — had the authority to provide the money if lawmakers wanted the reimbursements to continue.

That legal argument had substantial history behind it.

But the practical consequences were different from simply eliminating a government expenditure.

Insurance companies were still legally required to provide the underlying benefit.

Congress Considers Restoring the Payments

The consequences became apparent quickly enough that lawmakers began discussing legislation to restore the CSR reimbursements.

Republican Senator Lamar Alexander of Tennessee and Democratic Senator Patty Murray of Washington developed a bipartisan stabilization proposal that would have funded the payments temporarily while making other changes to the ACA marketplaces.

The debate illustrated the strange situation Washington had created.

Republicans had spent years criticizing federal payments associated with Obamacare.

But ending this particular payment risked increasing premiums and federal spending elsewhere.

The question was no longer simply whether Washington would spend money.

It was how the money would move through the health-insurance system.

Obamacare Survives Another Attack

Trump's October 12 decision did not repeal Obamacare.

It did not eliminate cost-sharing reductions.

And it did not eliminate federal subsidies for marketplace insurance.

Instead, it changed how the cost of one portion of the system was financed.

Insurers continued providing reduced deductibles and copayments to eligible customers because federal law still required them to do so.

Many insurers compensated by increasing Silver-plan premiums.

Those increases produced larger federal premium tax credits for many subsidized consumers.

The Affordable Care Act had once again proved more difficult to dismantle than its opponents expected.

Republicans had tried legislation.

The Senate had stopped them.

Trump then used executive authority to eliminate payments his administration argued Congress had never properly funded.

But even that did not eliminate the underlying benefit.

The expense moved.

The insurance market adjusted.

And Obamacare remained.

On October 12, 2017, the Trump administration ended billions of dollars in direct payments to health insurers.

It was intended as a major change to the Affordable Care Act.

Instead, it demonstrated just how deeply the law's interconnected subsidies, mandates and insurance rules had become embedded in America's health-care system.