President Trump abruptly decided on Oct. 13 to stop paying the Affordable Care Act’s cost-sharing reduction (CSR) payments.
CSRs are provided directly to insurers to reduce out-of-pocket costs, like co-pays and deductibles, for low-income consumers enrolled in the individual market. This decision, following months of uncertainty, has destabilized the insurance market and driven up premiums as insurance companies are required to provide CSRs to eligible consumers, whether or not they receive money from the federal government. California Attorney General Becerra leading a coalition of 18 states and the District of Columbia is suing to force the president to continue the CSR payments. The states sought an emergency injunction to compel the administration to follow the law. NHeLP filed an amicus brief (or friend of the court brief) in support of the states on behalf of Families USA, NHeLP and 29 other health and consumer advocacy organizations.
Covered California has already taken stopgap measures to protect California consumers from bearing the burden of the president’s rash decision. Covered California is implementing a “CSR surcharge” that requires Covered California’s 11 insurance carriers to load the lost revenue of CSRs onto Silver-level premium rates. Although this surcharge will increase Silver premiums by 12.4 percent on average, most consumers will not see a significant change in the net price they pay for their monthly premium because the approach is intended to keep premiums affordable for people, so the federal government covers excess increases. Consumers who are eligible for subsidies will receive increased financial help in the form of increased Advanced Premium Tax Credits (APTCs) to offset the premium increases caused by the CSR loss. Some of these consumers may even pay less because the subsidy will increase more than the surcharge. Consumers who are ineligible for subsidies will face higher premiums but will be encouraged to shop and compare through Covered California for a different plan or to purchase insurance directly from an insurance company. In 2018, California insurers are required to provide an off-Exchange plan that provides essentially the same scope of benefits as the on-Exchange plan without the “CSR surcharge” to allow consumers currently enrolled in Silver unsubsidized plans to retain an affordable option.
Although Covered California is attempting to protect consumers, cutting off CSR payments is a clear attempt to sabotage the ACA. Such actions to halt CSR payments so close to open enrollment will also certainly create a great deal of confusion for consumers. The irony of this decision is that it substantially increases the costs for the federal government by increasing subsidies for all individuals up to 400 percent FPL to offset the loss of CSR funding for individuals only up to 250 percent FPL. The Congressional Budget Office recently projected that ending the CSRs would cost the government $194 billion by 2026.
Covered California’s open enrollment period for 2018 remains the same: November 1, 2017 – January 31, 2018.