TrumpCare: The President Wants to Change the US Health Insurance System

Over the weekend, President Donald Trump proposed sending subsidies the federal government pays to insurance companies under the Affordable Care Act (ACA) directly to Americans, reports ABC News.

"I recommend Senate Republicans send the hundreds of billions of dollars now going to greedy insurance companies to prop up the bad Obamacare system DIRECTLY TO THE PEOPLE SO THEY CAN BUY THEIR OWN, MUCH BETTER, HEALTHCARE and keep the money," Trump wrote on social media.

It was one of his first lines after the September 2024 presidential debates, when he said he intended to replace the ACA and that he had "concepts" for a plan.

Some Republicans supported the idea, including Senator Lindsey Graham of South Carolina, who called it "just brilliant."

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Currently, approximately 90% of ACA policyholders are eligible for subsidies—tax credits that reduce the cost of monthly insurance premiums. The government directs these subsidies to insurers.

Subsidies were part of the original ACA, passed under the Obama administration, and were expanded in 2021 to provide more assistance to those already eligible and to expand the scope of beneficiaries. In the "Big Beautiful Act" signed by Trump in July, the subsidies were not extended and are set to expire at the end of the year.

Health policy experts said the proposal is lacking details, so it's unclear whether it will lead to higher medical costs. They noted that under such a scheme, insurance companies could retain more of the funds collected through insurance payments.

"The president's idea was very poorly developed," said Leighton Koo, a professor and director of the Center for Health Policy Research at the Milken Institute at the George Washington University School of Public Health. "Frankly, I think he was just trying to show that he had something to offer."

White House spokesman Kush Desai stated, "President Trump remains committed to his Day One priority—reversing the affordability crisis and economic impasse inherited by Joe Biden. Self-proclaimed experts should hold off on hasty analysis until the administration presents concrete policy proposals, rather than baselessly speculating on the details of the president's initiatives."

Rising Costs for Americans

Gerald Anderson, a professor of health policy and international health at the Johns Hopkins Bloomberg School of Public Health, said Trump's proposal raises two possible scenarios—both theoretically feasible, but both would require significant changes.

The first option: ACA policyholders receive money and pay for medical services directly, rather than through the insurer. This, he says, is unlikely to impact the insurance system itself.

The second option: Americans receive money and buy any insurance of their choice, not necessarily on the official insurance market.

"If that's the case, it could have a significant impact on the Affordable Care Act and the system as a whole, because the ACA was designed to ensure that insurance packages on the exchange were valid and provided services to people," he emphasized. "Previously, we had a lot of sham insurance that wasn't insurance at all."

Ku said Trump's idea might work well for young and healthy people, but it would make things worse for the elderly and those with chronic illnesses.

He explained that, for example, a $1000 subsidy for a young, healthy person might be more than the current cost of their insurance.

"But if you're older or have chronic conditions like diabetes, heart disease, HIV, the cost of insurance can be extremely high, and $1000 is far from enough compared to what you currently get as a subsidy in the ACA marketplace," he explained.

As Koo said, the ACA marketplace was designed to ensure people receive comparable levels of coverage, protecting patients from being charged different prices based on their condition.

Anderson believes that if young, healthy people leave the insurance pool by buying minimal insurance or opting out, premiums will rise for everyone.

The higher the proportion of people with severe or chronic illnesses in the pool, the higher the overall costs and the faster the payments grow.

"This leads to a so-called death spiral, where premiums rise while the number of insured people falls," Anderson explained. "Insurers will continually look for loopholes to avoid accepting people with serious illnesses."

Ultimately, payments may become so high that even those who especially need insurance may find it unaffordable.

How will this affect insurance companies?

Trump's idea could have both pros and cons for insurers, experts say.

Anderson noted that the federal government currently pays subsidies to ACA insurance companies to support low-income people.

If people are given, for example, $15,000 or $20,000, they may choose to spend that money on other things rather than on insurance.

"The question is whether they'll use the money to buy insurance or just keep it because they need to pay for a car or buy food," he argued. "Insurers will be very concerned that the money won't reach them."

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Ku added that Trump's proposal does not take into account the so-called medical expense ratio, which determines the share of payments that must go toward medical services.

Under the ACA, insurers are required to spend 80% of their revenue from individual and small group premiums on health care, and 20% can be used for administrative and overhead costs.

If people buy individual policies instead of participating in large groups, their financial protection will be weaker, Ku concluded. Therefore, such a scheme will be unsuccessful.

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