President Donald trump announced two measures earlier this month that some say could undermine the Affordable Care Act. One that allows insurers to sell cheaper plans that don’t comply with Obamacare’s guaranteed benefits, and another that would eliminate out-of-pocket subsidies for some enrollees.
Trimmed down policies
Under the Affordable Care Act, all of the policies were required to offer a minimum level of coverage, and these extras are part of what makes the coverage so expensive. But now the Trump has authorized the issuance of trimmed-down policies. Just how bare bones might these policies be? It’s not clear yet, but the fact that the option exists is a big concern, since analyst predict healthy people will leave the traditional plans in droves, in search of the more affordable trimmed-down options.
That leaves just the sickest individuals in the existing marketplace, and as a result, the cost of the traditional Obamacare coverage will become outrageously expensive.
Perhaps the most immediately consequential health policy decision of Trump’s presidency was his announcement of the order to discontinue “cost-sharing reduction” payments to insurers.
What are these payments and what are the consequence of ending them? The cost-sharing reduction payments, or CSRs, are subsidies that under the ACA insurers are required to provide to low-income customers in order to make insurance more affordable. These subsidies are only for people who buy insurance in the individual market, which means they buy coverage on their own instead of getting it through their employer or the government.
The CSRs are different from the better-known subsidies for people in the individual market — the tax credits that the federal government pays to reduce people’s premiums. Instead the CSRs are aimed specifically for the lowest-income people — those making between 100 and 250% of the federal poverty level.
Under the Obama administration, and the Trump administration, the federal government had been reimbursing insurers for providing the CSRs. The government was expected to spend about $7 billion on them in 2017, according to the Congressional Budget Office. That annual cost would have risen to about $16 billion in 2027 had the payments been left in place.
Congressional Republicans sued to stop them.
Republicans in the U.S. House of Representatives sued the Obama administration in 2014 to block federal reimbursement of the subsidies, arguing that the payments had not been authorized by Congress. A trial court judge last year ruled in favor of Republicans, but the judge’s order was put on hold while the Obama administration appealed. That meant the payments were in limbo, kept alive only by the Trump administration’s willingness to continue the appeal.
They are supported by a bipartisan group of governors.
Continuing the CSRs, at least for a little while, was a major component of the health care plan put forth this summer by Colorado Gov. John Hickenlooper, a Democrat, and Ohio Gov. John Kasich, a Republican. The payments also received the backing of a bipartisan committee of governors at an August meeting of the National Governors Association.
Without federal reimbursement for the CSRs, insurers have repeatedly said they will have to make up their costs by raising premiums on everyone. The Congressional Budget Office has estimated that premiums for some plans in the individual market would rise by as much as 20% if the CSRs are ended and other changes to the law aren’t made.
When will the cuts go into effect?
The Obama and Trump administrations have been making the subsidy payment month by month, so two Trumps administration officials said payments would cease immediately. The next payment is due within days.
Trump’s decision to end the funding immediately may have been a surprise, but he’s been considering cutting the payments for months. A group of Democratic state attorneys general – already fighting Trump polices on many other fronts – had earlier this year entered the legal battle to try to preserve the cost-sharing measures.
When the CSR reimubursement goes away, the benefits — reduced out of pocket payments to lower income insured — won’t go away. Insurers will still have to offer these plans with lower deductibles and co-pays to people who make up to 250% of the federal poverty level . That’s $60,750 for a family of four in 2017.
Companies Could Leave the Market
Ending the CSR reimbursement, as just approved by Trump, is grounds for any insurer to back out of its federal contract to sell health plans for 2018. So there could potentially be a big exit of insurance companies out of the marketplace.
But that’s not what most companies have opted to do. Instead, to make up the difference, insurers are raising their premiums. Many already factored this into their rate increase for next year.
According to Kansas Insurance Commissioner Ken Selzer, that was the option companies offering ACA insurance in Kansas took.
“There won’t be a disruption in the market,” Selzer told the Topeka Capital Journal. “The insurers that are operating on the exchange in Kansas have filed rates presuming that the CSRs won’t be there.”
That’s why, if you’ve received your notice of rate for next year from your ACA insurance company, you saw a pretty healthy increase in your pre-tax credit monthly premium.
The National Association of Insurance Commissioners estimates that Trump’s move would produce a 12 to 15% upsurge in premiums, while the nonpartisan Congressional Budget Office has put the figure at 20%. That’s on top of premium increases from growing medical costs.
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Ending the CSRs will increase, not decrease, federal spending.
Because the federal government will spend more on tax credits without the CSR reimbursement in place, the Congressional Budget Office estimates that ending the CSRs will grow the federal deficit by $6 billion in the first year they are ended and by a total of $194 billion over the first decade.