Premiums for silver-level exchange plans for the 2018 coverage year would increase by about 20 percent if the Trump administration were to step paying insurers cost-sharing reductions (CSRs) called for under the Affordable Care Act (ACA), according to a Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT) analysis released Tuesday.
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Background: Admin remains noncommittal to CSRs
The administration has been making CSR payments to insurers on a monthly basis, but has not given any indication on whether it will make future payments. According to Reuters, the next payments are due Aug. 21.
President Trump has threatened to discontinue the payments. If the administration stops making the payments, insurers still would be required to give the out-of-pocket cost discounts under the ACA, but the federal government would not compensate insurers without an explicit appropriation from Congress. Some insurers have said they would scale back or withdraw from the exchanges without greater certainty that CSR payments will continue, and others have said the uncertainty could result in larger premium rate increases. Some insurers also have signaled they would file lawsuits if the payments are not made.
CBO says premiums could spike if CSR payments stop
CBO/JCT for the analysis assumed that the federal government would not make the CSR payments after December. However, CBO/JCT wrote that the projections are "uncertain and would depend on how the policy was implemented," as well as how "federal agencies, states, insurers, employers, individuals, doctors, hospitals, and other affected parties would respond to the changes."
CBO assumed that all of the premium increases would be loaded onto silver-level ACA plans, which are eligible for the CSRs. If insurers instead spread the premium increases across all kinds of ACA plans, the results would be different.
Effects on premiums, out-of-pocket costs
CBO/JCT estimated that if the administration stops making the CSR payments, premiums for silver-level exchange plans could increase by 20 percent for the 2018 coverage year and by 25 percent in 2020 when compared with baselines CBO predicted in March 2016.
CBO/JCT also estimated that discontinuing the CSR payments ultimately would add $194 billion to the federal deficit from 2017 through 2026 because the premium increases would cause a correlating increase in the amount of subsidies the federal government would have to pay under the ACA to help offset coverage costs for individuals enrolled in exchange plans. According to the analysis, federal spending on the subsidies would grow by $365 billion over the next decade, offset by $118 billion in savings over the next 10 years from discontinuing the CSR payments.
As a result of the subsidy increases, CBO/JCT said the amount of premiums U.S. residents would pay out-of-pocket for silver-level exchange plans would be "similar to or less than what they would pay otherwise."
Further, CBO/JCT predicted that most state insurance regulators would not allow insurers to significantly raise premiums for bronze- or gold-level exchange plans, meaning for some consumers, gold-level plans with more comprehensive coverage could be more cost effective than silver-level plans.
For example, CBO/JCT estimated that the annual premium for a silver-level exchange plan in 2026 for a 40-year-old with an annual income of $34,100 would be between $6,500 and $8,200. When accounting for subsidies the individual could receive, his or her out-of-pocket premium cost for that plan would equal about $3,350. In comparison, the annual premium for a gold-level exchange plan in 2026 for the same individual would be about $7,900. When accounting for subsidies the individual could receive, his or her out-of-pocket premium cost for that plan would equal about $3,050. The analysis stated, "Gross premiums for gold plans would eventually be lower than those for silver plans."
Effects on uninsured rate, insurer participation
CBO/JCT projected the number of uninsured U.S. residents would increase by one million in 2018 when compared with CBO's baseline predictions. However, CBO/JCT said the number of uninsured U.S. residents would drop by one million each year beginning in 2020 if the CSR payments stop when compared CBO's baselines predictions. The analysis stated, "By 2020, the effect on coverage would stem primarily from the increases in premium tax credits, which would make purchasing nongroup insurance more attractive for some people. As a result, a larger number of people would purchase insurance through the [exchanges], and a smaller number of people would purchase employment-based health insurance."
CBO/JCT also projected that more insurers would exit the exchanges in 2018 if the CSR payments were to end, leaving about 5 percent of U.S. residents without exchange plan options. However, CBO/JCT said that trend would reverse over time, with exchange plans being sold in most areas throughout the United States by 2020.
Policymakers react
Senate Minority Leader Chuck Schumer (D-N.Y.) said, "Try to wriggle out of his responsibilities as he might, the [CBO/JCT] report makes clear that if … Trump refuses to make these payments, he will be responsible for American families paying more for less care."
House Minority Leader Nancy Pelosi (D-Calif.) said the analysis "once again exposes the vast cynicism of … Trump's threats to purposefully raise Americans' health costs by cutting off [CSR] payments." She called on Republican lawmakers to "stabilize the markets and lower costs for all Americans."
Senate Health, Education, Labor, and Pensions Committee Chair Lamar Alexander (R-Tenn.) said the analysis highlights "a real and immediate concern." He added, "Congress should work quickly in September to pass limited, bipartisan legislation that funds cost-sharing payments for 2018 and gives states more flexibility to offer lower cost plans."
The White House, meanwhile, again appeared to question the accuracy of CBO/JCT's analyses. White House spokesperson Ninio Fetalvo said, "Regardless of what this flawed report says, Obamacare will continue to fail, with or without a federal bailout." Fetalvo added that the administration has not yet made a decision on the CSR payments, saying, "We continue to evaluate the issues" (Mangan, CNBC, 8/15; Abutaleb, Reuters, 8/15; CBO/JCT report, 8/15; Leonard, Washington Examiner, 8/15; Demko, Politico, 8/15; Johnson, "Wonkblog," Washington Post, 8/15; Roubein, The Hill, 8/15; Galewitz, Kaiser Health News, 8/15; Pear/Kaplan, New York Times, 8/15; Armour, Wall Street Journal, 8/15; Alonso-Zaldivar, AP/Sacramento Bee, 8/16).
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