Killing the Affordable Care Act cost-sharing reduction subsidy program in an orderly way might actually cut the net cost of individual major medical coverage for typical consumers who shop carefully, according to Congressional Budget Office analysts.
Because simply eliminating the subsidy program, without making other changes in the ACA, could cut monthly coverage payments for many consumers, the move could actually increase the total number of people with individual major medical coverage, the analysts write in a new report.
Insurer confusion about the subsidy change could cut individual enrollment by about 1 million in 2018, to about 17 million, but a drop in out-of-pocket costs for good shoppers could increase the number of people with individual coverage by about 3 million over the “baseline level” in 2025, to about 28 million, according to CBO figures.
CBO analysts emphasize that the accuracy of their predictions will depend on many factors beyond their control, including whether the administration of President Donald Trump simply decides to stop making the subsidy payments or gets Congress to pass a law eliminating the subsidy program.
“Implementation of the policy through legislation, as opposed to executive or judicial action, would provide greater certainty,” the analysts write.
Even effects of an orderly end to the subsidy program would be complicated.
Consumers would probably need more help from agents and brokers to find the cheapest coverage, or the highest-value coverage. The complexity could even give agents who want to cross-sell life insurance or annuities some incentive to dip a toe back into the individual major medical market.
Here’s a look at what the cost-sharing reduction subsidy program is, how the proposed subsidy elimination might work, and strange ways an orderly elimination could, possibly help the hardy people who still sell individual major medical coverage.
ACA Individual Major Medical Subsidies
The drafters of the Affordable Care Act created the ACA public health insurance exchange program, or web-based health insurance supermarket, to give consumers an easy way to shop for health plans from private insurers.
The ACA drafters also created two major subsidies designed to help low-income and moderate-income consumers pay for exchange coverage.
One, the premium tax credit subsidy program, helps exchange plan users with incomes from 133% of the federal poverty level to 400% of the federal poverty level pay their exchange plan premiums. About 84% of exchange plan users use the premium tax credit subsidies to pay their premiums, according to the Centers for Medicare and Medicaid Services (CMS).
The second program, the cost-sharing reduction subsidy program, helps exchange plan users with incomes under 250% of the federal poverty level who buy silver level plans, or plans with mid-level benefits, pay health plan deductibles, co-payments and coinsurance amounts. About 60% of
The House has argued for years that the U.S. Department of Health and Human Services, the parent of CMS, has no valid authorization from Congress it can use to make the cost-sharing reduction subsidy payments. Under former President Barack Obama, HHS officials held that the same congressional appropriation that covers the premium tax credit subsidy program covers the cost-sharing reduction subsidy program, because the two subsidies are part of the same subsidy framework.
President Donald Trump has questioned whether HHS has the authority to continue making the payments, but, so far his administration has continued to make the payments.