A whirlwind of activity following the White House announcement that cost-sharing reduction (CSR) reimbursements would no longer be made has culminated, at least for now, in a bipartisan agreement in the Senate to appropriate the payments for two years. While the legislation negotiated by Senators Alexander and Murray had 24 co-sponsors as of October 19, it is unclear at this writing if President Trump will sign it. According to news reports, the President is pushing for changes to core provisions of the Affordable Care Act (ACA), such as repeal of the individual mandate and the expansion of “association health plans” that are exempt from ACA insurance standards. As the bipartisan Alexander-Murray bill moves forward, negotiators should balk at such demands. Restoring CSR payments should not require any compromises that undermine consumer protections and access to insurance.
Cost-Sharing Reduction Plans Are a Key Part of ACA, but Are the Reimbursements Essential?
By lowering deductibles, copayments, coinsurance and other cost-sharing, the CSRs play a vital role in making access to health care affordable for the lowest income enrollees in the health insurance marketplaces. However, the CSR payments to insurers are not necessary to make sure enrollees can obtain the lower cost-sharing plans. The ACA requires insurers provide CSR plans to eligible enrollees regardless of whether CSR payments are made. To be sure, ending the payments has caused market disruption and premium increases. But the adverse effects can be limited and, in the long run, it may be possible to hold the vast majority of consumers harmless and even make better coverage more affordable for some.
Many Enrollees Are Held Harmless, and Some Can Afford a Better Plan for Less
Insurers raised premium rates for 2018 either because of an expectation that CSR payments might cease or, as was the case in Montana, following the announcement that the payments were ending. But, because the premium tax credit increases dollar for dollar with increases in premiums of the benchmark plan, individuals eligible for premium assistance are mostly held harmless. People eligible for the CSR plans should be able to receive those plans without a change in their premium. In some states, where insurers are loading the entire CSR-related rate increase on silver plans, gold plans will be less expensive than silver plans. Since the premium tax credit is based off of a silver plan in each state, the cost of gold plans – which have lower cost-sharing than a traditional silver plan – will actually be lower than they would otherwise be for individuals receiving premium tax credits. This means that many people will be able to get a better plan than they could have afforded had CSR payments continued without threat.
It’s not all Rosy: Some Individuals Will Pay More, Insurers may Exit, and Taxpayers Take a Hit
This does not mean ending the CSR payments is good policy or that it has no negative repercussions. People who are not eligible for the premium tax credit, or receive a very small credit, are not held harmless in the same way. When open enrollment begins, some people who are not eligible for the credit may discover that silver plans are no longer affordable. And, with the Trump administration making massive cuts in consumer outreach and assistance, many may not realize that more affordable options are available outside of the marketplaces. Additionally, several states allowed insurers to spread the CSR surcharge across all plans, meaning that unsubsidized individuals will have to pay more for insurance regardless of the level of coverage they choose.
Although most insurers have been able to increase premiums to stem the financial losses associated with the end of CSR payments, many may question their long-term commitment to the marketplaces. Some may worry about the loss of healthy, unsubsidized enrollees. Others may be concerned about a continued partnership with a federal government that appears committed to the market’s demise.
Ultimately, it will be federal taxpayers hurt the most by the government’s decision to cut off CSR payments: an estimated $194 billion will be added to the federal deficit over ten years.
Consumer Protections Should Not be Negotiated Away to Protect the Markets
The negatives associated with the end of the CSR payments are not strong enough to require a compromise on other provisions of the ACA in exchange for restoring the CSR payments. As a whole, ending CSR payments does not destroy the insurance system and does not end lower cost-sharing plans for low-income enrollees. Because the President has been threatening CSR payments for months, many states and insurers were prepared and had plans to reduce the harm from ending the payments. Those plans actually result in better insurance being more affordable for many enrollees.
In fact, negotiating away key consumer protections in return for a couple of years of CSR payments would create more harm to consumers. Eliminating the individual mandate would result in 15 million more uninsured by 2026 while increasing the budget deficit by $416 billion. Weakening the guardrails on the 1332 waiver, such as by allowing states to waive some or all of the essential health benefits, would result in higher costs for people with pre-existing conditions.
Looking Forward, States Can Protect Their Markets
Congress should move bipartisan legislation to restore the CSR reimbursements to insurers for three primary reasons: (1) to help lower premiums for unsubsidized consumers in states that have failed to hold them harmless; (2) to reduce the projected federal deficit; and (3) to demonstrate to insurers, whose participation in the marketplaces is entirely voluntary, that they will continue to have a reliable federal partner that keeps its promises.
However, as negotiators face demands to weaken the ACA’s consumer protections, they should keep in mind that the disruption caused by ending the CSR payments has been limited. As we move past the 2018 open enrollment, states can learn from each other and from the insurers how to best adapt to the lack of CSR payments for future years. By open enrollment for the 2019 plan year, plans should be able to rate in a way that makes coverage affordable for most enrollees.