By Caroline Humer and Yasmeen Abutaleb
NEW YORK/WASHINGTON (Reuters) - A failed Republican effort to replace Obamacare raised new concerns on Tuesday for U.S. health insurers over whether the government will continue to fund billions of dollars in medical benefit subsidies.
The healthcare bill under consideration in the U.S. Senate would have settled the funding question, but was scrapped after Republican leaders were unable to rally enough party members to win approval.
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Its demise will test the ability of Republicans and Democrats to stabilize an insurance market serving some 10 million Americans in time for 2018.
Republican President Donald Trump has suggested several times that he could eliminate the so-called cost-sharing reduction subsidies, which help pay for consumers' out-of-pocket healthcare expenses.
The administration could do so as early as August. Insurers have braced for an end to these payments, in many cases raising proposed premium prices for 2018 more than 20 percent to make up for the lost funding.
Insurers said on Tuesday they would like Congress to appropriate the funds for these payments. If that does not happen, and the Trump administration takes further measures to undermine Democratic former President Barack Obama's healthcare law, more insurers may pull out of markets for next year ahead of a late September deadline.
That could force consumers to change plans or insurers - or leave them with no options at all.
"Our members and all Americans need the certainty and security of knowing coverage will be available and affordable for them," said Justine Handelman, senior vice president in the Office of Policy and Representation at the Blue Cross Blue Shield Association, which represents insurers nationwide.
"We have consistently urged that there be immediate, certain funding for the cost-sharing reduction program, which helps those most in need with out-of-pocket costs when they access medical care."
Molina Healthcare Inc <MOH.N>, which provides Obamacare health plans to more than 1 million people, said the fate of cost-sharing subsidies is one of its top concerns. The Trump administration could take other steps on its own to undermine Obamacare, including refusing to enforce the individual mandate, which requires Americans to have health insurance or pay a fine.
Trump has repeatedly said Obamacare, formally known as the Affordable Care Act, is collapsing, and on Tuesday suggested letting it "fail" to force Democrats to work on a healthcare fix. Earlier this year, the administration backed off more strictly enforcing the individual mandate and pulled ads that encouraged people to sign up for health insurance.
Uncertainty over the government's next steps on Obamacare weighed on insurer shares on Tuesday, with Anthem Inc <ANTM.N> down 1.4 percent and Aetna Inc <AET.N> off 1.1 percent. UnitedHealth Group <UNH.N>, which pulled out of the Obamacare individual insurance business, rose 0.3 percent after reporting a better-than-expected quarterly profit.
Senate Majority Leader Mitch McConnell said the Senate would vote in the coming days on a full repeal of Obamacare with no replacement, but he did not appear to have the necessary support to push it through.
Some Republicans and Democrats say they should attempt a joint fix, but the deep divisions between the two parties were on display over the subsidies on Tuesday.
Democratic Senator Patty Murray said that bipartisan work can begin by having Congress fund the cost-sharing subsidies.
"We know that's what needs to be done," she said in an interview. "It would send a very strong message to the market."
Several Republican senators were quick to deride the payments.
"Those who will be interested in moving an insurance bailout later this year should be ready to explain how they want to pay for it," said Republican Senator Orrin Hatch, chairman of the Senate Finance Committee.
(Reporting by Caroline Humer in New York and Yasmeen Abutaleb in Washington; Additional reporting by Susan Cornwell in Washington; Editing by Michele Gershberg and Jonathan Oatis)