If insurers flee the marketplaces because the federal government stopped making cost-sharing reduction payments, premiums on the most popular plans on Affordable Care Act exchanges could spike as much as 37 percent, and the number of uninsured Americans could increase by 9.4 million in 2018, according to a report by the Urban Institute, with funding from the Robert Wood Johnson Foundation.
The fate of CSR payments is currently being decided on a month-to-month basis. The Trump administration and the House of Representatives have requested delays on the hearing of the House’s 2016 lawsuit against the former Obama administration over the CSRs, arguing that the Treasury could not reimburse insurers for these subsidies because the funds had not been explicitly appropriated by Congress.
“The federal government is now paying the insurer reimbursements one month at a time with no commitment to continue,” the study says. “Congress could appropriate funds to make the payments and end the uncertainty, but so far it has not exercised this power.”
The Urban Institute analyzed three 2018 scenarios that could occur if federal CSR payments stop:
Scenario 1. If insurers have enough time before the start of the plan year to incorporate their anticipated CSR costs into a surcharge placed on silver marketplace premiums and are willing to remain in the marketplaces, then the surcharge would increase silver premiums by 23 percent in 2018. About 600,000 more people would enroll in marketplace coverage, reducing the number of uninsured. However, the federal government would spend 18 percent more on premium tax credits than it would have spent on tax credits and CSRs combined under current law, an additional $7.2 billion in 2018.
Scenario 2. If insurers exit the marketplaces in response to the loss of CSRs and other policy uncertainties and changes, such as lack of clarity on intended enforcement of the individual mandate and the administration’s substantially reduced commitment to outreach and enrollment assistance, the number of uninsured people would increase by 9.4 million, enrollment in the private nongroup market would decrease by 57 percent, and nongroup premiums would rise by 37 percent. Eliminating the tax credits and CSRs would reduce federal spending on this assistance by $40.7 billion in 2018.
The authors write that some states may experience scenario one while others experience scenario two.
Scenario 3. If lawmakers alter the ACA in response to the elimination of CSRs such that insurers are no longer required to pay CSRs to eligible enrollees, 4 million more people would be uninsured, and nongroup premiums would rise by 12 percent.
The authors write that this last scenario is possible but unlikely, “given the contentiousness of the current political environment.”
“By this point, pricing strategies have been developed in the event that the cost-sharing reductions are not paid,” says Katherine Hempstead, senior advisor at the Robert Wood Johnson Foundation. “Yet these contingency plans pose challenges for insurers, will be confusing to consumers, and ironically will probably cost the federal government more.”