President Obama paid them anyway, and lost a court battle in which a judge side with House Republicans who said the payments were illegal.
In response, Mr Trump on Friday again suggested his administration would let the Obamacare programme "implode".
This is D-day for insurers on the federal exchange. That's especially true in California, which has always had one of the most stable and competitive markets, she said.
The judges also reasoned that states could be harmed if the cost-sharing payments were cut off because increased insurance prices could translate into more uninsured residents for whom the states needed to provide health care, including at public hospitals. The cost-sharing reduction subsidies are separate from subsidies offered as tax credits to help consumers pay their marketplace plan premiums. If the president cuts off the cost-sharing payments, he says, the rates will be much higher. "The Congressional Budget Office (CBO) estimates the cost of these payments at $7 billion in fiscal year 2017, rising to $10 billion in 2018 and $16 billion by 2027". A bronze plan covers about 60 percent of a customer's health care costs, with relatively low monthly premiums, while a platinum plan will cost more each month but pay 90 percent of total health costs. Its two top executives (both sons of the plan's founder, C. David Molina) were abruptly ousted from the firm earlier this year. And these folks have to pay only an average of $941 a year out-of-pocket, compared to $6,528 for those who don't qualify. The payments offset the deductibles and other out-of-pocket costs for individuals in MA earning up to $30,150 a year, and families of four earning up to $61,500. A couple in their 60s had a similar plan, but were just outside the subsidy limit of $96,000 for the family.
While he can't change the law unilaterally, Trump does wield power over the subsidies.
A district court judge agreed with House Republicans, and now the case is on hold before the US appeals court in Washington.
Tuesday's ruling held that attorneys general led by New York's Eric Schneiderman and California's Xavier Becerra can intervene in the appeal against the lower court's ruling. In May, 16 state attorneys general from both Republican- and Democratic-led states, led by California and NY, asked the federal appeals court for permission to intervene in the case. Some prominent GOP lawmakers have expressed support for that.
But the Affordable Care Act will not survive in its current form because, structurally, it can't.
The reason CSRs are in limbo at all is because House Republican who did not want Obamacare to succeed sued the administration, claiming the payments to insurers were illegal because they had not appropriated money for them.
Insurers, meanwhile, are taking steps to protect themselves.
The governors association said it needs an answer soon, because insurers are trying to set rates for 2018 by September.
"The proposed increases for Silver level plans on the exchange are significantly higher this year, even more than the increases for Bronze or Gold level plans, due to the potential refusal by the federal government to fund the Cost Share Reduction (CSR) mechanism", the departmentsaid in a statement.
In the other chamber of Congress, the House of Representatives, 40 Democrats and Republicans have formed a group called the Problem Solvers Caucus, which aims to come up with bipartisan solutions Obamacare's troubles.
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