The 'single most destabilizing factor' facing Obamacare and premiums has health insurers sweating

The deadline for health insurers to make rate submissions for 2018 Obamacare plans is just one month away.

With that benchmark looming, the industry is still waiting for the Trump administration to provide clear answers about funding for cost-reduction subsidies, which help lower health care costs for millions of Americans on exchange plans.

"It's a pretty stressful time for those millions of Americans who count on the subsidies, and (for) the health plans that are trying to develop some affordable packages for them," said Ceci Connolly, president and CEO of the Alliance of Community Health Plans, which represents not-for-profit insurers.

"When you're doing it in the dark, and you don't even know what might be coming in, it becomes impossible," Connolly said.

Cost-sharing reduction subsidies, known as CSRs, help lower out-of-pocket costs for lower-income Obamacare enrollees. Health insurers front the money to help reduce deductibles and out of pocket costs for more than 7 million lower-income Obamacare consumers, then get reimbursed by the government.

On Friday, half a dozen health industry groups, including America's Health Insurance Plans, the American Medical Association (AMA), as well as the Chamber of Commerce, sent a letter to Senate leaders. The groups urged lawmakers to maintain money for the program, calling uncertainty over funding "the single most destabilizing factor causing double-digit premium increases for 2018."

'Never seen anything like this'

CSR payments are estimated at $7 billion for this year, and another $7 billion to $12 billion next year. But the legality of those payments has been in doubt after House Republicans sued the Obama administration to block CSR funding, and a federal judge ruled in their favor.

The Trump administration has continued making the payments, but the president has said he sees CSR funding up for negotiation. At this point, the administration has offered no commitment to continue the payments beyond this month, leaving insurers and enrollees unsure about what comes next.

"I don't think any of us have ever seen anything like this. This is not a business problem, this is a failure to govern problem," said Robert Laszewski, president of insurance consulting firm Health Policy and Strategy Associates.

"The Trump administration (seems) to be delighting in sabotaging this, and making it worse so that it serves (its) political ends," he said.

In fact, the administration could pull the plug as early as Monday. That's when Trump officials must tell a federal judge whether they will appeal a ruling the case, now known as House v. Price.

House leaders asked the court ruled to put the case on hold for three months after President Donald Trump took office. Most analysts had assumed the House and the administration would ask to continue the case for at least another three months, and that the payments would continue while congressional republicans work on an Obamacare replacement bill.

Now, they're not so sure.

House Speaker Paul Ryan "and the president could continue the case," but the decision isn't up to them explained Chris Jennings, the founder of Jennings Policy Strategy, and former deputy assistant to President Obama for Health Policy during the launch of the Affordable Care Act.

"You cannot presume the judge will allow for quarterly continuance," Jennings said.

"The judge knows the Trump administration has been using this as a political card rather than being serious about settling the court case," concurred Laszewski. "The judge could decide to dismiss the case right now, in which case those cost-sharing subsides would go away."

Worried that the Trump administration would not act to maintain the payments, attorneys general from 15 states and the District of Columbia, filed a motion last week to intervene in the case.

They argue in their filing that stopping the payments abruptly will cause a collapse of the individual health insurance market, telling the judge that "the wrong decision could trigger the very system-wide 'death spirals' that central ACA features, such as stable financing, were designed to avoid."

If the payments stop abruptly, health insurers would likely try to pass on the cost to consumers, and many of would likely have to drop coverage because they couldn't afford to pay.

"You will see severe disruption in the market happen very, very quickly," said Connolly. "You're going to have health plans and average families making very, very difficult choices."

Connolly said state insurance regulators have been working with health plans to try to come up with contingencies, if the CSRs are canceled for 2018. Despite entreaties from state officials and health care groups to act now, the question is whether republican leaders in Washington are prepared to step in to prevent the collapse of Obamacare markets.

"I don't know that the crisis will be enough to justify an intervention," said Jennings.

Recently, Ryan pushed back on a New York Times editorial that accused Republicans of creating uncertainty and destabilization in the Obamacare market, in part because of the threat of ending CSR payments.

"The writing was already on the wall that Obamacare was failing. Unfortunately, the Left is only now calling it out—with a pathetic attempt to point the finger at Republicans," Ryan said in a statement.

Yet, if consumers in markets already suffering from low insurance offerings weaken further, there will be plenty of blame to go around.

"You can't just keep playing chicken or you're going to hurt a lot of people, and you're going to hurt the people that voted for you," said Laszewski. "It's just uncertainty, confusion, anxiety -- I don't know what it accomplishes," Connolly said.

—By Bertha Coombs. Follow her on Twitter: @coombscnbc