Late last night, on the heels of its executive order on health care, the Trump administration said it would end cost-sharing reduction payments (CSRs) under the Affordable Care Act. The announcement, which makes good on a months-long threat, comes a mere two weeks before ACA open enrollment begins, and has thus elicited widespread alarm and condemnation. A Washington Post headline described the move to nix CSRs as "throwing a bomb into the insurance markets."
That's an apt omen. Cutting off CSR payments has been described by insurance executives, state insurance commissioners, and politicians across the political spectrum as the worst thing the Trump administration could do for the stability of the ACA's non-group marketplaces. It's also a bad idea for the federal government—insurers, who will still be required to provide plans with low out-of-pocket costs to low-income consumers, will respond to this by increasing premiums, which means the federal government will actually have to spend more money on ACA premium subsidies. The Congressional Budget Office has projected that stopping CSR payments will result in one million additional Americans going uninsured in 2018, premiums increasing by 20 percent in 2018, and the deficit increasing by $194 billion over the next 10 years.
So what does this mean for people who buy their insurance in the non-group markets? The good news is that, while this decision may be an assault on health care, it's not exactly an unexpected one. Many states around the country have allowed insurers to price their 2018 policies to allow for the possibility that CSRs may not be paid. A group of health-care wonks have been tracking the ways in which states are dealing with the possibility of CSRs not being paid. In general, states have taken four different approaches to this uncertainty. A much more detailed explainer can be found here, but here are the four basic strategies:
- Assume that CSRs will be paid. (A bad idea, it turns out.)
- Assume CSRs won't be paid and spread the premium increases across all tiers of plans (bronze, silver, gold). This is better than the first strategy, but still not ideal, since it means that many consumers who don't receive premium subsidies will face higher premiums across all types of plans.
- Assume CSRs won't be paid and add premium increases onto only silver-level plans. The advantage of this strategy is that, since the ACA's premium subsidies are benchmarked to silver plans, people who receive subsidies will be protected entirely from the premium increases, and most of the pain will be absorbed by the federal government. (But those who don't receive subsidies will face higher premiums on silver-level plans.)
- Assume CSRs won't be paid and implement something wonks are referring to as a "Silver Switcharoo." This is quite complicated but it essentially results in virtually all of the increased costs being borne by the federal government in the form of higher premium subsidies for consumers who purchase on-exchange silver-level plans and are eligible for subsides.
And here, courtesy of ACA Signups, is a breakdown of the CSR strategies different states are employing:
The markets in states that have taken steps to prepare for this eventuality likely won't see any last-minute insurer exits—and many customers will be protected thanks to their premium subsidies, although those that aren't eligible for the subsidies will face higher premiums in some states. The big question now, though, is what happens to insurer participation in the 14 states that instructed insurers to file rates assuming CSRs will be paid.
Nicholas Bagley, a law professor and health-care expert, identifies one sure outcome: lawsuits. Lots and lots of expensive lawsuits. "This year, cost-sharing payments have amounted to about $7 billion. Unless Congress moves to repeal or amend the Affordable Care Act—good luck with that—obligations of similar size will accrue through 2018 and beyond," Bagley writes. "In other words, we're about to see witness of the largest lawsuits, dollar-wise, in United States history."