Capping off his executive order last week, President Trump stated that his administration will immediately stop making cost sharing reduction (CSR) payments, a move that is expected to drastically increase premiums, the federal debt, and the number of bare counties.

Late last Thursday, Trump tweeted “The Democrats ObamaCare is imploding. Massive Subsidy payments to their pet insurance companies has stopped. Dems should call me to fix!” promptly ending the reimbursement of CSR payments. Health Insurance companies are legally required, through the ACA, to provide these silver plans for households with incomes below 250 percent of the federal poverty line.

In a joint statement released Friday, Senator Chuck Schumer (D-NY) and House Democratic Leader Nancy Pelosi (D-CA) called the move “sabotage leveled at working families and the middle class in every corner of America.”

“President Trump has apparently decided to punish the American people for his inability to improve our health care system,” the statement said. “Trumpcare collapsed because Americans overwhelmingly recognized the cruelty and higher costs it meant for them and their loved ones. Now, millions of hard-working American families will suffer just because President Trump wants them to.”

According to the Congressional Budget Office report, the decision to end the payments, which were expected to total $7 billion this year, would have the below projected outcomes, compared to what would have occurred if the CSR payments were continued:

  • The fraction of people living in areas with no insurers offering nongroup plans would be greater during the next two years and about the same starting in 2020;
  • Gross premiums for silver plans offered through the marketplaces would be 20 percent higher in 2018 and 25 percent higher by 2020—boosting the amount of premium tax credits according to the statutory formula;
  • Most people would pay net premiums (after accounting for premium tax credits) for nongroup insurance throughout the next decade that were similar to or less than what they would pay otherwise—although the share of people facing slight increases would be higher during the next two years;
  • Federal deficits would increase by $6 billion in 2018, $21 billion in 2020, and $26 billion in 2026; and
  • The number of people uninsured would be slightly higher in 2018 but slightly lower starting in 2020.

This forecast caused “considerable risk” in the health insurance industry, according to Zane Chrisman, Deputy Commissioner, Regulatory Health Link Division, for the Arkansas Insurance Department. Ms. Chrisman and several other state representatives spoke about the uncertainty and concern caused by the potential loss of CSR payments during the Medicaid Managed Care conference earlier this month.

However, based on reports like the above, major health insurers were ready for this financial loss. Centene Corp., Health Care Service Corp., Florida Blue, Molina Healthcare Inc. and Medica, have been preparing for the federal money to disappear so they won’t be as impacted by the change. Many states have also granted companies extra rate increases to make up for the loss.

In states without this benefit, like Maryland, it’s a different story. These states are more likely to feel the side effects mentioned in the Congressional Budget Office report. Although they’ve already have to sign off on their 2018 ACA plans, issuers in these states may seek to revisit their rates.

Sources:

  1. http://www.politico.com/story/2017/10/12/trump-obamacare-subsidy-243736
  2. https://www.cnbc.com/2017/10/12/obamacare-bombshell-trump-kills-key-payments-to-health-insurers.html
  3. http://www.marketwatch.com/story/trump-announcing-end-to-cost-sharing-payments-slams-insurers-hospitals-2017-10-13
  4. https://www.wsj.com/articles/health-insurers-face-big-financial-hit-after-trump-move-to-end-aca-subsidies-1507902956?ru=yahoo?mod=yahoo_itp&yptr=yahoo

The views and opinions expressed by the authors on this blog website and those providing comments are theirs alone, and do not reflect the opinions of Softheon, Inc. or any employee thereof.  

Jen Eyring

Jen Eyring

Communications Manager at Softheon
Jen Eyring is the Communications Manager at Softheon. Prior to this role, she focused on creating instructional documentation for Softheon’s five core solutions and their corresponding operating procedures. She has also acted as a Product Manager for our Foundry solution. Jen holds a BA in Writing, Rhetoric, and Technical Communication from James Madison University and is working toward her MA in Strategic Communication at American University.
Jen Eyring