Gross premiums for silver-level health insurance plans purchased through the healthcare marketplace would be 20 percent higher in 2018 and 25 percent higher by 2020 if cost-sharing reductions (CSRs) payments to insurers as contemplated under the Affordable Care Act (ACA) were terminated at the end of this year, according to a new report from the Congressional Budget Office released this week. The Effects of Terminating Payments for Cost-Sharing Reductions is an analysis done by the CBO and the Joint Committee on Taxation to estimate the impact to the federal budget, health insurance coverage, market stability, and health insurance premiums if CSR payments ended after December 2017.
Under the ACA, insurance companies must offer plans with reduced deductibles, copayments, and other means of cost sharing to people who purchase these plans through government healthcare exchanges and who meet certain eligibility requirements based on income level. In turn, insurers receive CSR payments from the federal government to cover these costs. The Trump administration has threatened to stop the CSR payments to insurance companies as a way to undermine the ACA in light of the recent failure of the Republican-controlled Congress to repeal and replace the healthcare legislation.
The good news for the majority of individuals obtaining insurance through government run health exchanges is that any increase in insurance premiums likely would be offset by Premium Tax Credits (PTCs) available through the ACA. The amount of the PTCs provided is generally equal to the premium for the second lowest cost silver plan available through the healthcare marketplace. The PTCs increase as insurance plan premiums increase. The Kaiser Family Foundation estimates that 71% of people obtaining insurance through the health marketplace this year are enrolled in silver plans.
The bad news is the expected impact to the federal deficit. IF CSR payments were to end in 2017, the CBO estimates the federal deficit would increase a net of $194 billion from 2017 through 2026 to cover the additional costs associated with PTCs.
The CBO report said it expected insurance companies would withdraw from the healthcare exchanges in 2018 because of the market uncertainty concerning CSR payments. Anthem recently announced it will be pulling out of the ACA marketplaces in Nevada, Virginia and half of the counties in Georgia in 2018. United Healthcare, Aetna and Humana also have pulled back coverage offerings in many states.
The Los Angeles Times quoted Anthem’s reasons for leaving the Virginia exchange as “a shrinking and deteriorating individual market, as well as continual changes and uncertainty in federal operations, rules and guidance, including cost sharing reduction subsidies and the restoration of taxes on fully insured coverage.”
