The Administration Ends CSR Subsidy Payments — What Comes Next?
On Friday, Oct. 13, 2017,the Trump Administration announced it would no longer make cost-sharing reduction (CSR) payments to insurers offering coverage on health insurance marketplaces. The announcement cited guidance from the US Department Justice that questioned the legality of the appropriation for these payments (for more Cost Sharing Reduction Debate: Why This Matters and How States Are Preparing for an Uncertain Future).
How It Impacts the 2017 Insurance Marketplace
The Affordable Care Act (ACA) requires insurers to offer CSR subsidies to individuals earning between 100 to 250 percent of the federal poverty level (up to $29,700 income for an individual or $60,750 for a family of four) who purchase plans on the marketplace. In 2017, approximately 7 million individuals — 58 percent of all marketplace consumers — received CSR subsidies. Long-standing consumer protection policies restrict the ability of insurance issuers to adjust rates or withdraw from markets mid-year, so issuers have few options but to fully absorb the costs of CSR subsidies paid on behalf of enrollees for the remainder of 2017.
What This Means for States and Insurers in 2018
Open enrollment for 2018 begins Nov, 1, 2017. On that date, rates and health plan offerings must be set so consumers have accurate information about their insurance plan choices. Insurers in most states were required to submit final rates for 2018 plans by Sept. 27, 2017, before the Administration issued its decision to stop CSR payments (See: Explore the Limited Choices States Face as Washington Debates CSR Payments). To date, most states and insurers chose to submit rates with CSR costs “loaded,” meaning their premium prices assumed the loss of federal CSR payments.
States and issuers that opted to “CSR load” have reported premium increases ranging from 6 percent (Colorado) to 20 percent (Idaho) on top of normal rate increases to account for CSR losses. Increased premiums will lead to a commensurate increase in tax credits to consumers as the tax credits are based on premium costs for silver-level health plans sold on the marketplace. As a result, consumers earning between 100 to 400 percent of the federal poverty level who qualify for the credits will largely be shielded from the premium increases because of the increase in tax credits.
Those most affected will be individuals and families making over 400 percent of the federal poverty level ($47,550 per year for an individual or $97,200 for a family of four), who do not qualify for tax credits and will now bear the full costs of these premium increases.
Insurers in at least 11 states did not originally set rates that included the “CSR load” (Alaska, Colorado, Georgia, Maryland, Massachusetts, Montana, North Dakota, Oregon, South Dakota, Vermont, and Washington). Because they own and operate their own technology, states that operate state-based marketplaces (Colorado, Maryland, Massachusetts, Vermont, Washington) have greater flexibility to adjust rates as deemed appropriate by state regulators, insurers, and marketplace operators. The remaining states utilize the federally-facilitated marketplace (FFM), which is operated by the Centers for Medicare & Medicaid Services (CMS). These states will be limited in their ability to issue changes, pending guidance from CMS. Some, including Alaska and Oregon, have signaled they will immediately adjust rates to account for CSR payment loss. With open enrollment set to begin, these states and insurers must rapidly pivot if they wish to make adjustments prior to the Nov. 1, 2017, sign-up date.
Prior to the Administration’s announcement, several insurers had announced their decisions to exit markets, citing growing costs and market uncertainty spurred by the Administration’s lack of clarity over CSR payments and enforcement of the individual mandate. To date, no additional insurer has announced its intent to exit an insurance market as a result of the Administration’s CSR decision. However, a provision in the 2018 contract for issuers offering through the FFM allows some latitude for these insurers to exit due to CSR funding issues.
Congress and States Take Action
The Administration’s decision may revive Congressional efforts to assure, at least temporarily, payment of CSR subsidies. This was one area of near universal agreement during recent bipartisan hearings on market stabilization held by the Senate Health, Education, Labor, and Pensions (HELP) Committee in September. Following these hearings, Sens. Lamar Alexander (TN) and Patty Murray (WA) have been working on a stabilization bill that is likely to include these payments. Sen. Ron Johnson (WI) has also expressed that he will propose language to fund CSR payments, while proposing other insurance market reforms such as additional flexibility for short-term plans and use of health savings accounts. However, even if a bill is passed, it is uncertain whether the President would sign a bill that is construed as bolstering insurance markets regulated by the ACA.
Meanwhile, 18 states and Washington, DC have filed a lawsuit against the Administration’s decision to discontinue CSR payments. It is possible that, while the case is pending, courts will require the Administration to continue to make CSR payments, drawing out the uncertainty of the issue until the legal case is resolved.
Regardless of future actions, states and consumer groups are actively preparing for the open enrollment season, including launching outreach efforts to lessen consumer confusion spurred by ongoing uncertainty over national health reform efforts. NASHP will continue to monitor their efforts and report as the open enrollment season approaches.