White House says it can't lawfully pay Obamacare subsidies

President Donald Trump will stop payments worth billions of dollars to health insurers to subsidize low-income Americans, the White House said on Thursday, a move health insurers have warned will cause chaos in insurance markets and a spike in premiums.

The move to undermine President Barack Obama's signature healthcare law, officially called the Affordable Care Act, drew criticism from Democrats and the threat of a lawsuit from state attorneys general.

Trump has made the payments, guaranteed to insurers under Obamacare to help lower out-of-pocket medical expenses for low-income consumers, each month since taking office in January. But he has repeatedly threatened to cut them off and disparaged them as a "bailout" for insurance companies.

The White House said late on Thursday that it cannot lawfully pay the subsidies to health insurance companies.

A White House statement said that based on guidance from the Justice Department, "the Department of Health and Human Services has concluded that there is no appropriation for cost-sharing reduction payments to insurance companies under Obamacare."

"In light of this analysis, the Government cannot lawfully make the cost-sharing reduction payments," the statement said.

Senate Democratic Leader Chuck Schumer and House Democratic Leader Nancy Pelosi derided the move in a joint statement, saying Trump would single-handedly push American's healthcare premiums higher.

"It is a spiteful act of vast, pointless sabotage leveled at working families and the middle class in every corner of America," they said. "Make no mistake about it, Trump will try to blame the Affordable Care Act, but this will fall on his back and he will pay the price for it."

New York Attorney General Eric T. Schneiderman said in a statement he was prepared to lead other attorneys general in a lawsuit.

"I will not allow President Trump to once again use New York families as political pawns in his dangerous, partisan campaign to eviscerate the Affordable Care Act at any cost," he wrote.

"This summer, the courts granted our intervention to defend these vital subsidies and the quality, affordable health care they ensure for millions of families across the country. Our coalition of states stands ready to sue if President Trump cuts them off."

(Reporting by Steve Holland, Jeff Mason and Yasmeen Abutaleb; Editing by Michael Perry and Edwina Gibbs)