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This page last updated on October 18th, 2017.

The Administration’s CSR decision: what does it mean for me?

Late last week, the Trump Administration announced that it has decided to stop paying cost sharing reductions (CSRs) owed to insurance companies under the ACA.

What are CSRs and why are they important? Under the ACA, some lower-income people who buy Silver-level plans on the Exchange are entitled to assistance with their out-of-pocket health spending (deductibles, co-pays, and co-insurance). Insurers have to give these discounts to eligible customers. The federal government is then supposed to reimburse the insurers for the amount of these discounts. Politico estimates that the value of the CSRs for 2017 will total $7 billion.

How is the Administration in position to cut off these payments? In 2014, Congressional Republicans sued the Obama Administration. The lawsuit claimed that the government didn’t have the authority to reimburse insurers for the CSR discounts because Congress had not specifically appropriated the money for those payments. A federal district court agreed with this claim, but stayed enforcement of its decision so the Administration could appeal. Following the election and the change of Administrations, the court extended the stay (and the Trump Administration continued making the payments, on a month-to-month basis) while the new Administration weighed how to proceed. Last week, the Administration announced that it now considers the CSR payments to be illegal “bailouts” to the insurance industry. In fact, the payments are not “bailouts” but “rather a statutory obligation of the federal government to pay insurers for services they have provided as required by law.”

What are the consequences of the Administration’s decision on CSRs? No one yet knows all the ramifications, but here are some key points:

  • If you have an Exchange plan for 2017 and currently receive assistance with your deductibles and copays, that assistance will continue. Insurers are required by federal law to continue giving these discounts.
  • Open Enrollment for 2018 ACA Exchange plan coverage will proceed as scheduled (in most states, from November 1 to December 15, 2017).
  • The Administration’s decision about CSRs will have complicated effects on the cost of coverage, so please consider your options carefully during the Open Enrollment period!
    • In most states, premiums for Exchange plans will rise sharply as insurers fold the cost of the unpaid CSRs into their prices, BUT
      • If you get a subsidy to help purchase insurance on the Exchange (“advance premium tax credits,” or APTC), the amount of your subsidy will also increase, protecting you from the rise in premiums.
      • If you are entitled to CSR assistance with your out-of-pocket spending, and you purchase a qualifying Silver plan, you will continue to receive that CSR assistance in 2018.
      • If you qualify for APTC subsidies but not for CSR assistance, you should broaden your comparison shopping during Open Enrollment: for example, in some states, Gold plans may be a cheaper option than Silver plans for 2018.
      • If you don’t qualify for APTC subsidies to help pay for your premiums, you should investigate your options on the off-Exchange market (in most states, the costs of the unfunded CSRs are loaded onto Exchange plans only).
  • Luckily, we seem to have avoided the worst-case scenario of insurers deciding to abandon the Exchanges altogether. (Insurers in more than half the states have “escape clauses” in their contracts with the exchanges; these clauses allow them to exit the marketplace in the event the government stops paying the CSRs. In most states, insurance regulators are working to make sure that this does not happen.)

Will Congress take action? Early reports suggest that Senators may be reaching a bipartisan deal to fix this problem by appropriating money for the CSRs. A final version of the legislation has not been released yet, but an outline was presented to GOP senators. The outline included: procedural changes to the way states apply for 1332 waivers, allow consumers over age 30 to buy catastrophic health insurance plans, and provide $106 million for outreach and enrollment efforts for the Marketplace. This plan does not change the comprehensiveness of insurance plans and the essential health benefits are kept in place. The Administration has signaled that the President would be open to signing such legislation, but without a final version or a set date for a vote on the Senate floor, nothing is certain.. We will continue to update you as we learn more about possible legislative responses to the CSR decision. Please stay tuned!


New Executive Order on Insurance

Following the collapse of Congressional efforts to repeal and replace the Affordable Care Act (ACA), President Trump today signed an Executive Order that aims to loosen the ACA’s regulation of insurance plans. We wanted to give you a quick overview of what’s known, so far, about the Order – but one key takeaway is that the Executive Order does not change your insurance options for 2018.

Today’s Executive Order, written in very general terms, directs federal agencies to take actions to allow the sale of cheaper insurance that covers fewer benefits. Federal agencies are directed to “consider expanding access to”:

  • association health plans (these allow small employers to join together to purchase insurance, but are exempt from ACA rules on scope of coverage); and
  • short-term health plans (these typically exclude coverage for pre-existing conditions, cap benefits, and come with high deductibles; under the ACA, these policies could not cover periods longer than 3 months).

Health policy experts are concerned that expanding access to these types of plans could siphon off younger and healthier people from the risk pool. With fewer healthy people in the ACA-compliant insurance market, comprehensive plans (needed by people with chronic conditions) would become ever more expensive.

We want to assure you that, for the time being, the Executive Order changes nothing. The Executive Order by itself doesn’t have the force of law; it has no effect until the federal agencies adopt rules implementing the changes outlined in the Order. Rulemaking is a long process, requiring public notice and comment, and you can be sure that HFA will be monitoring, participating in, and updating you about that process! In the meantime, it is important to know that your insurance choices for 2018 are not affected by the Executive Order. As the Open Enrollment period begins in the coming weeks, please make sure to take steps to ensure you have insurance coverage for 2018!

 

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