CBO to weigh in on cost-sharing reduction payments
A new healthcare must-read will hit everyone’s summer list this week.
That’s when the Congressional Budget Office is set to release a report detailing what could happen to insurance markets if the federal government stops making costsharing reduction payments.
The payments, part of the Affordable Care Act, reimburse insurers for limiting deductibles and copays to individual customers with incomes of less than $29,700, or 250% of the poverty level. Premiums for the plans those customers buy do not cover the cost of the generous benefits.
The CSRs have long been a political hot potato and the focus of Republican efforts to dismantle the ACA. House Republicans in 2014 sued to get rid of the payments, arguing that the legislative branch, not the executive branch, allocates federal spending. A federal court agreed. The Obama administration appealed, but the case is now on hold as the Trump administration decides what to do. President Donald Trump has repeatedly threatened to end the payments as a tactic to get Democrats to the negotiating table.
The administration has, in the meantime, been making the CSR payments on a month-by-month basis, creating considerable uncertainty for insurers and state regulators as they try to set 2018 rates. The CMS late last week extended until Sept. 5 the deadline for plans to file their adjusted rates.
HHS officials also told insurers that while “there have been no changes” to cost-sharing reduction payments, the department will change its risk-adjustment methodology in states that have asked insurers to increase silver plan rates on the assumption that the payments stop. Because customers face far less outof-pocket costs in plans with limited deductibles and copays, there is likely to be more utilization, so it will treat these plans differently in the risk-adjustment formula, according to HHS.
The Kaiser Family Foundation this year reported that ending the payments would end up costing the federal government more than continuing them. The projection is that insurers would be owed $10 billion in CSR payments next year. Kaiser analysts said that premium support to buy plans would increase by $12.3 billion as insurers have to raise rates to account for the lost payments.