- In a recent letter to the President and leading members of Congress, insurance payer groups and the nation’s largest provider organizations detailed their case to retain the cost sharing reductions (CSR) provision in the ACA.
Payers rely on CSR subsidies to offset costs for lower income consumers and those with complex and expensive medical conditions. In 2016, CSR subsidies were estimated at $7 billion dollars.
“The most critical action to help stabilize the individual market for 2017 and 2018 is to remove uncertainty about continued funding for cost sharing reductions,” the letter stated. “The window is quickly closing to properly price individual insurance products for 2018.”
The ACA mandates that payers provide plans for low and modest income individuals. According to CMS, federal CSR subsidies helped provide coverage to 5.9 million people in 2016.
The CSR subsidy is also used to defray the cost of health plans by reducing consumer out-of-pocket costs for premiums. This applies mostly for those with incomes between 100 and 250 percent of the federal poverty level, $11,880 to $29, 700.
In 2014, House Republicans sued the federal government to halt CSRs. The suit claimed that it was unconstitutional for the federal government to reimburse payers for costs associated with ACA requirements. In May 2016, a federal district court ruled against the subsidies. The decision is presently awaiting appeal.
The current administration has held off on its legal strategy for the appeal, instead suggesting it might drop CSR subsidies entirely mid-year 2017.
The letter argues that the results of eliminating CSRs include limited choices for consumers, higher premiums inside and outside the exchanges that could drive out those who do not qualify for tax credits, increased uncompensated care levels, and increased burdens for taxpayers to make up for the cut subsidies.
The CSR also serves to cover all costs after the out-of-pocket limit is reached. For 2016, the maximum was $6,850 for single coverage and $13,700 for families. This provision is particularly helpful to people who encounter a significant health crisis and require extended treatment.
In recent comments to the Wall Street Journal, President Trump threatened to cut off the subsidies as a way to bring Democrats to the negotiating table for an ACA reform bill. The statement from the President drew immediate push back from Congress.
“Refusing to make the Cost Sharing Reduction payments has no purpose but to hurt millions of people, and manufacture a crisis,” said Nancy Pelosi (D-CA). “If President Trump followed through on his appalling threat, millions of Americans would see their out-of-pocket costs skyrocket and premiums would immediately be driven up by at least 15 percent.”
In an unusual pairing, provider and patient advocacy groups are joining payers in their call for CSR payments to continue and be stabilized.
“While each of these stakeholders has its own perspective on how to approach health care reform, they all agree that every American deserves affordable coverage and high-quality care,” said AHIP in a separate release. “As part of that commitment, they agree that funding CSRs is in the best interest of patients, providers and taxpayers.”
“Without CSRs, health care coverage will be out of reach for them. Plans will likely drop out of the market. Premiums will go up for everyone. Costs will go up for taxpayers. And doctors and hospitals, foundational to their communities, will see even greater strains on their ability to care for people.”
For both payers and beneficiaries, the situation would be complicated. “For starters, these insurers have signed contracts with federal and state regulators obligating them to sell on the marketplaces,” stated a recent review by The Commonwealth Fund. “They are bound under those contracts to continue to provide coverage to enrollees.”
“Eliminating the reimbursements to insurers for cost-sharing reduction (CSR) subsidies could result in insurer losses and solvency challenges,” said Shari Westerfield, Vice President, Health Practice Council at the American Academy of Actuaries
“This could lead to insurers opting to withdraw, leading to severe market disruption and loss of coverage among individual market enrollees—both those receiving CSR subsidies and those not.”