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Ending Obamacare payments to insurers to cover out-of-pocket costs for low-income people would benefit others who receive premium subsidies in most states.
Insurers in 26 states are planning to add the cost of losing cost-sharing reduction (CSR) payments onto silver-tier plans, Christina Cousart, senior policy associate for the National Academy of State Health Policy, told Bloomberg Law Oct. 17. That loss, estimated at about $10 billion in 2018, could add an additional 20 percent to the cost of plans, health insurance actuaries say.
Affordable Care Act tax credits for low- to moderate-income people will rise with the higher premiums. In contrast to CSRs, tax credit subsidies are based on the cost of the second-lowest-cost silver plans in the exchanges. As silver-plan premiums rise to make up for the lost CSRs, higher value gold plans may cost the same in some areas as silver plans, Cousart said. At the same time, people who don’t receive the premium tax credits will need to steer clear of the silver tier plans to avoid paying the highest costs, an official with the National Association of Insurance Commissioners told Bloomberg Law Oct. 17.
As state regulators grapple with how to handle President Donald Trump’s Oct. 12 decision to discontinue the payments to insurers, the complicated structure of the ACA’s subsidies means people will have a greater need for help.
The situation is fluid, as Oct. 17 Sen. Lamar Alexander (R-Tenn.), chairman of the Committee on Health, Education, Labor and Pensions, announced that he and ranking Democrat Patty Murray (D-Wash.) have reached a market stabilization compromise that would allow the subsidies to continue. President Trump endorsed the deal as a “short-term solution.”
The deal also includes restoring $106 million in outreach funding. The Trump administration announced in August it was cutting navigator assistance funding by more than 40 percent.
But state insurance regulators attempted to make plans in the meantime.
Regulators in Alabama, Alaska, Arkansas, California, Connecticut, Florida, Idaho, Hawaii, Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Mexico, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia, Washington, and Wyoming either gave guidance to insurers to include the cost of the cost-sharing reductions in silver plans, or all insurers operating in exchanges in those states were planning to do that anyway, Cousart said.
As a result, “consumers could buy gold plans once they get tax credits almost cheaper than what they could buy silver plans for,” Cousart said. Silver plans cover an average of 70 percent of medical claims, while gold plans cover an average of 80 percent.
Health insurers filed their exchange contracts Sept. 27, but Trump’s Oct. 12 decision has thrown the market into disarray.
In Wisconsin, where the average premium increase is likely to be 36 percent, the increase for the benchmark second-lowest-cost silver plan averages 50 percent, Deputy Insurance Commissioner J.P. Wieske told Bloomberg Law Oct. 16.
Wisconsin required carriers to file premiums assuming that they wouldn’t get the cost-sharing reduction payments, Wieske said. Under the ACA insurers are required to reduce out-of-pocket costs for people with incomes between 100 percent and 250 percent of the poverty level, but a federal district court ruled in 2016 that the Obama administration made the payments to insurers illegally without a congressional appropriation.
Loading the CSRs onto silver plans means that the cost of the plans for other metal tiers “should not be affected” by the loss of the CSRs, Wieske said.
Premiums rose an average of 25 percent for 2017, and they may rise by about as much for 2018, even with the CSR payments to insurers, administration officials said on an Oct. 12 press call announcing an executive order on health-care market changes.
In addition, the Congressional Budget Office estimated that by not making the cost-sharing payments to insurers, federal deficits would increase by $6 billion in 2018, $21 billion in 2020, and $26 billion in 2026, because payments for tax credit subsidies for individuals under the ACA would rise to cover increased premiums.
Tennessee Department of Commerce & Insurance Commissioner Julie Mix McPeak said insurers in that state filed their rates loading the CSR cost onto the silver plans following guidance from the Department of Health and Human Services.
“We could have required rates spread across all plans, but we thought it’s probably in the consumers’ best interests” to load them onto the silver plans, she told Bloomberg Law.
“The difficulty is, the mid-market consumer who might be interested in a silver plan and isn’t qualified for premium subsidies in some instances will probably be priced out of the silver level market,” McPeak said. “It was a very difficult call.”
As of March 15 about 10.3 million people had signed up and paid for coverage in the ACA marketplaces, according to the HHS. Eighty-four percent of the enrollees received premium tax credits, while 57 percent received the CSRs.
Colorado directed carriers to spread the additional premium increase with the non-CSR-funded rates across all plans in all tiers, not just load those costs onto the silver-level plans, Vincent Plymell, spokesman for the state Division of Insurance, told Bloomberg Law Oct. 17.
Still, Plymell said, individuals who receive the advance premium tax credit (APTC) “will largely be insulated from premium increases since subsidies will go up” as the premiums in the silver tier are expected to go up.
Colorado also had carriers submit two sets of premium rates—plans with CSR-funded rates for 2018 and plans with non-CSR funded rates—and the division has already approved the nonfunded rates. The additional increase to 2018 premiums, which went up by 26.7 percent, will be 6 percent, Marguerite Salazar, Colorado insurance commissioner, said in a statement.
“We knew this could happen and we were prepared with a contingency plan,” she said. “The Division of Insurance is already switching gears so open enrollment can still take place and Colorado consumers can enroll in health insurance for 2018.”
In Washington state, the Office of the Insurance Commissioner has also approved a set of rates assuming the termination of CSR payments, Ben Spradling, spokesman for the office, told Bloomberg Law. Rates for gold, bronze, and catastrophic plans are not affected, he said.
North Dakota Insurance Commissioner Jon Godfread told Bloomberg Law Oct. 17 that he was skeptical the termination of CSR payments would reduce the number of uninsured by giving APTC-eligible individuals a price incentive to seek coverage.
Income eligibility levels are not changing, he said, and there are no cost-reduction options for individuals who are not receiving the subsidy. “You’re robbing Peter to pay Paul,” he said.
Any increase in the number of people who see coverage would have to be offset by the number who turn away from the market given the political uncertainty around the ACA and a perception that the Trump administration is trying to kill it, he said.
To contact the editor responsible for this story: Kendra Casey Plank at firstname.lastname@example.org
Changes in 2017 Federal Navigator Funding is at https://www.kff.org/health-reform/issue-brief/data-note-changes-in-2017-federal-navigator-funding/.
The Effects of Terminating Payments for Cost-Sharing Reductions is at https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/53009-costsharingreductions.pdf.
The 2017 Effectuated Enrollment Snapshot is at https://downloads.cms.gov/files/effectuated-enrollment-snapshot-report-06-12-17.pdf.
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
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