Obamacare provides tax credits for people earning up to 400 percent of the poverty level to help them purchase health insurance in the exchanges. The law also gives lower-income people additional money, so called cost-reduction subsidies, to purchase health insurance within the exchanges.

The funds for these cost-reduction subsidies were never appropriated by Congress. The Obama Administration, however, did an end-run around Congress and withdrew the money from the Treasury Department unilaterally. The Republican House of Representatives sued the Obama Administration and won. The case was appealed and now resides in the appellate court. Payments continue until the appeal process is completed. (here)

The Trump Administration could simply drop the lawsuit and withhold the cost-reduction subsidies.

The Congressional Budget Office recently weighed-in on eliminating the subsidies. (here) Its most publicized finding was that withholding the funding would add $194 billion to the federal deficit over the next ten years. This number is based on the speculation that premiums in the exchanges would increase and that the increase in tax credits would drain billion off the federal budget.

The fundamental problem in the exchanges is not the withholding of the cost-reduction subsidies. The Obamacare exchanges suffer from adverse selection. Insurance premiums in the individual market, both inside and outside the exchanges, are rapidly rising because young, healthy people are being priced out of the market. A higher percent of older and sicker individuals are signing up which drives up costs, making the price of insurance even less attractive to healthy people.

This adverse selection has happened since the exchanges began in 2014 under the Obama Administration. The death spiral of the exchanges began long before the cost-reduction subsidies were an issue.

The Obama Administration estimated that at least 40 percent of exchange enrollees needed to be young and healthy. Since 2014, the highest recorded percent has been 28. (here)

Cost-reduction subsidies are simply prolonging the inevitable collapse of the Obamacare exchange marketplaces.