Trump administration officials shook health insurers, and health care providers, late Thursday by announcing they will cut off Affordable Care Act cost-sharing reduction (CSR) subsidy program payments.
The $7 billion cost-sharing reduction subsidy program is helping 7 million ACA exchange plan users with income from 100% to 250% of the federal poverty level handle health plan deductibles, co-payments and coinsurance amounts for silver-level coverage. The money goes straight to the health insurers. The next payment, to insurers, was due next week.
Eric Hargan, the new acting secretary of the U.S. Department of Health and Human Services, and Seema Verma, the administrator of the Centers for Medicare and Medicaid Services, said in a memo that their legal advisors believe the government lacks a valid congressional appropriation to make program payments.
“In light of that opinion — and the absence of any other appropriation that could be used to fund CSR payments — CSR payments to issuers must stop immediately,” Verma and Hargan said in the memo. “CSR payments are prohibited unless and until a valid appropriation exists.”
Here’s a look at three things agents, brokers and other financial professionals need to know about the CSR program, and about the possible effects of a mid-year termination of CSR payments.
1. Milliman analysts put out a great analysis of the cost-sharing reduction subsidy program in March.
The Obama administration tended to skimp on offering details about the operations of the CSR program.
About 58% of current Affordable Care Act exchange plan enrollees are using the subsidies to reduce their out-of-pocket health care costs, according to figures the government has published.
Analysts at Milliman, an actuarial consulting firm, provided some other CSR program details in March, by publishing a report on Affordable Care Act subsidy programs that includes data on how the CSR program and other subsidy programs worked in 2014 and 2015, and probably worked in 2016.
The biggest Affordable Care Act subsidy program is the advance premium tax credit program. That program helps exchange plan users with income from 100% to 400% of the federal poverty level pay their premiums.
Acting HHS Secretary Eric Hargan (Photo: HHS)
In the Milliman report, the analysts estimate that the premium subsidy accounted for about $5.7 billion, or 7%, of health coverage issuers’ $80 billion in 2016 individual major medical coverage revenue.
Analysts at Oliver Wyman recently estimated that insurers will collect about $88 billion in individual major medical premium revenue this year. Insurers may have been expecting to get a total of about $6 billion to $7 billion in CSR payments from the federal government for 2017, or about $500 million in payments per month.
The CSR program has been paying exchange plan issuers an average of about $1,000 per month per enrollee eligible for the subsidy.
2. The friends and foes of the Affordable Care Act have been fighting over the legality of the cost-sharing reduction subsidy payments for years.
Insurers have known about Republicans’ concerns about the legality of the cost-sharing reduction payment stream for years.
Democrats held so many seats in the House and the Senate when they worked on the Affordable Care Act that they were able to pass it with no Republican support.
Once they lost their “super majority” in the Senate, they were unable to win enough Republican support to pass any additional Affordable Care Act bills, aside from a few measures that happened to have strong Republican support.