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Administration’s Ending Of Cost-Sharing Reduction Payments Likely To Roil Individual Markets
Yesterday, October 12, 2017, the White House press office announced that the administration will no longer be reimbursing insurers for the cost-sharing reductions they are legally required to make for low-income individuals. The Affordable Care Act requires insurers to reduce cost sharing for individuals who enroll in silver plans and have household incomes not exceeding 250 percent of the federal poverty level. These provisions reduce the out-of-pocket limit for these enrollees—particularly for those with incomes below 200 percent of poverty—and sharply reduce deductibles, coinsurance, and copayments. The reductions cost insurers around $7 billion a year currently.
The press secretary’s statement said:
Based on guidance from the Department of Justice, the Department of Health and Human Services has concluded that there is no appropriation for cost-sharing reduction payments to insurance companies under Obamacare. In light of this analysis, the Government cannot lawfully make the cost-sharing reduction payments. The United States House of Representatives sued the previous administration in Federal court for making these payments without such an appropriation, and the court agreed that the payments were not lawful. The bailout of insurance companies through these unlawful payments is yet another example of how the previous administration abused taxpayer dollars and skirted the law to prop up a broken system. Congress needs to repeal and replace the disastrous Obamacare law and provide real relief to the American people.
Acting HHS Secretary Hargan and CMS Administrator Verma issued a similar statement:
It has been clear for many years that Obamacare is bad policy. It is also bad law. The Obama Administration unfortunately went ahead and made CSR payments to insurance companies after requesting—but never ultimately receiving—an appropriation from Congress as required by law. In 2014, the House of Representatives was forced to sue the previous Administration to stop this unconstitutional executive action. In 2016, a federal court ruled that the Administration had circumvented the appropriations process, and was unlawfully using unappropriated money to fund reimbursements due to insurers. After a thorough legal review by HHS, Treasury, OMB, and an opinion from the Attorney General, we believe that the last Administration overstepped the legal boundaries drawn by our Constitution. Congress has not appropriated money for CSRs, and we will discontinue these payments immediately.
The Legal Background
In fact, the ACA requires the federal government to reimburse insurers for these reductions. This is not a bailout. It is rather a statutory obligation of the federal government to pay insurers for services they have provided as required by law. In 2014, the House of Representatives sued the Obama administration in House v. Burwell (now House v. Price) claiming that the cost-sharing reduction (CSR) payments to insurers had never been appropriated by Congress and were thus illegal. A district court judge accepted this argument in the spring of 2016 and enjoined their payment, as President Trump’s statement says, but stayed her order pending appeal. The Obama administration appealed, arguing that there was in fact an appropriation. Until yesterday, the Trump administration had not taken a position on whether there was an appropriation or not.
The appeal is still pending, with the House and the Trump administration having agreed to stay the appeal several times. At the end of August, the D.C. Circuit Court of Appeals allowed 19 state attorneys general to intervene to protect their citizens. For more on the CSR backstory see here and here; for more on the intervention, see here; and for Health Affairs Blog posts on cost-sharing reduction payments, see here.
The Consequences Of Ending The CSR Payments
The effect of terminating the payments has been well analyzed, including a report from the Congressional Budget Office. It will drive up premiums as insurers attempt to cover the cost of the reductions. As premiums go up, so will premium tax credits. Indeed, the government will probably pay more in premium tax credits than it saves in cost-sharing reduction payments. Individuals who earn too much to receive tax credits will be particularly hard hit by the premium increases. Some of these could decide to pursue new forms of coverage that might be made available under the measures announced in President Trump’s October 12 executive order.
Ending the CSR payments could also drive some insurers out of the exchanges. Under their contract with the federal exchange, insurers may terminate participation if cost sharing reduction payments are terminated, but they are still subject to state laws on market withdrawal, which limit their ability to do so. They may not terminate their exchange enrollees unless they fail to pay their premiums, which many likely would do once an insurer left the exchange and premium tax credits were no longer available.
The effect of CSR payment termination, however, will depend heavily on how insurers deal with the change. In several states, including California, insurers have anticipated the termination and have already loaded the lost payments into their on-exchange silver plans. In other states, however, insurers have to date been instructed to assume that the payments will be made, or have been given no instructions whatsoever. In these states, the change is likely to cause considerable confusion. Insurers will have to refile their rates and will likely not be able to do so before open enrollment begins in three weeks. For more on the different responses insurers may have take, see here.
What Might Happen Now
It is possible that the states that have intervened in the House v. Price appeal will seek to block the withdrawal of the funds. It is also very possible that the state attorneys general or a consumer or insurer will sue to block the CSR withdrawal. New York Attorney General Eric Schneiderman issued a press release yesterday threatening legal action if President Trump withdraws the payments, and the California Attorney General has also threatened suit.
It is also possible that Congress will adopt a specific appropriation to fund the CSRs, putting to rest the question of whether such an appropriation exists. The Senate Health, Education, Labor, and Pension Committee held hearings on bipartisan solutions to health reform problems in September and virtually every witness, including insurance commissioners and governors supported removing the uncertainty around the payments and making it clear that they would continue. Support for continuing CSR funding has come from insurers, consumers, the National Association of Insurance Commissioners, and virtually all other stakeholders. The President’s statement, and the likely consequent chaos in the individual marketplaces, may be enough to finally prompt action.
In any event, ending the CSR payments is another sign that President Trump is doing what he can to undermine the stability of the individual market under the ACA. This action will have a much more immediate impact than the measures Trump announced in yesterday’s executive order.
18 states sue over Trump-halted ObamaCare payments
http://thehill.com/policy/healthcare/355360-15-states-sue-over-trump-halted-obamacare-payments
A new multi-state lawsuit has been announced to stop President Trump from halting key ObamaCare payments to insurers.
Eighteen states and Washington, D.C., signed onto the lawsuit filed Friday in federal court in California, according to Sarah Lovenheim, a spokeswoman for California Attorney General Xavier Becerra (D).
On Thursday night, Trump announced he would stop making the payments, which led to an outcry from critics saying he was sabotaging the health-care law.
The complaint will seek a temporary restraining order, preliminary injunction and permanent injunction requiring the cost-sharing reduction payments be made.
The administration, on a monthly basis, had been funding cost-sharing reduction subsidies, which compensate insurers for lowering the out-of-pocket costs of certain ObamaCare enrollees.
Trump has repeatedly signaled he might cut them off, while insurers have been pleading for long-term certainty that they would continue.
“Without the Affordable Care Act [ACA] and its subsidies for these families, millions more would be left in the cold without coverage. California isn’t about to turn its back on hardworking families who are fighting to hold onto their ACA health insurance. We’ve taken the Trump administration to court before and won, and we’re ready to do it again if necessary,” Becerra said in a statement Thursday night, before the lawsuit was officially announced.
Additionally, New York Attorney General Eric Schneiderman (D) said he anticipates proceeding with litigation on a case that’s currently been on hold.
The House sued the Obama administration, arguing the White House was illegally funding cost-sharing reduction subsidies payments to insurers.
Earlier this summer, the U.S. Court of Appeals for the District of Columbia Circuit ruled that a coalition of attorneys general — including Schneiderman and Becerra — can defend the payments.
“The fast track for initial relief will be in the case we’re filing in California,” Schneiderman said, referring to the new lawsuit.
The High Cost of Trump’s Controversial Obamacare Decision
The Trump administration announced late Thursday that it would stop paying subsidies to insurers that help cover the cost for about 6 million low-income customers on the Obamacare exchanges. The Department of Health and Human Services said that the cost sharing reduction (CSR) payments “will be discontinued immediately.”
Although eliminating the payments will save several billion dollars in the short run – the payments cost roughly $7 billion in 2017 and were set to rise to $10 billion in 2018 – the federal government will end up spending more on Obamacare subsidies due to the higher cost of health insurance. A CBO analysis from August found that terminating the payments “would increase the federal deficit, on net, by $194 billion from 2017 through 2026.”
Here’s what the controversial decision means:
Trump is clearly looking to destroy Obamacare: Combined with Trump’s executive order Thursday undercutting Affordable Care Act markets, this move represents taking a sledgehammer or a chainsaw to Obama’s signature law. “President Trump left little doubt yesterday that he intends to do as much damage as he can to the Affordable Care Act’s insurance markets,” Axios’s Sam Baker writes. “And he can do a lot.”
Many Americans, and insurers, will be hurt: Insurers have locked in their rates for 2018, but some may try to secure increases or decide to pull out of some markets. “This action will make it harder for patients to access the care they need. Costs will go up and choices will be restricted,” the Blue Cross Blue Shield Association and the health insurance trade association said in a joint statement. If premiums do jump as expected, low-income enrollees who get federal subsidies to cover the cost of their plans won’t feel the pinch, but millions of Americans who earn too much to qualify for the subsidies will face sharply higher costs.
It’s hard to find any winners here: “Trump’s new policy will increase premiums by 20%, cost the government $194 billion, increase the deficit, destabilize insurance markets, and increase the number of uninsured Americans,” Vox’s Ezra Klein tweeted. “There is nothing it makes better; it’s pure policy nihilism.”
Though some call it a win for the Constitution: The administration justified its move by citing a Justice Department decision that the payments were illegal without Congressional appropriation, a question at the heart of a lawsuit by House Republicans. “Today’s decision … preserves a monumental affirmation of Congress’s authority and the separation of powers,” the House Speaker Paul Ryan said in a statement late Thursday.
Not every Republican is pleased: “Cutting health care subsidies will mean more uninsured in my district. @potus promised more access, affordable coverage. This does opposite.” – Rep. Ileana Ros-Lehtinen (R-FL) tweeted. And Nevada Gov. Brian Sandoval said, “It’s going to hurt people. It’s going to hurt kids. It’s going to hurt families. It’s going to hurt individuals. It’s going to hurt people with mental health issues. It’s going to hurt veterans. It’s going to hurt everybody.”
And Democrats want to make sure Trump owns health care now – and “will pay the price for it”: “Sadly, instead of working to lower health costs for Americans, it seems President Trump will single-handedly hike Americans’ health premiums. It is a spiteful act of vast, pointless sabotage leveled at working families and the middle class in every corner of America,” House Minority Leader Nancy Pelosi (D-CA) and Senate Minority Leader Chuck Schumer (D-NY) said in a joint statement. “Now, millions of hard-working American families will suffer just because President Trump wants them to.”
Lawsuits are already in the works: “A coalition of U.S. states lined up on Friday to sue” to prevent the subsidy cuts, Reuters reports. Democratic attorneys general in New York and California are joining with other states, including Kentucky, Massachusetts and Connecticut, to file suit in federal court in California. Insurers, who are required by Obamacare to reduce out-of-pocket costs for low-income enrollees, could also sue to get the compensation the law promises in return.
The pressure will be on Congress to step in: “President Trump is once again the bull in the china shop, telling Congress, ‘I broke it, you buy it,’” ABC News says. Congress can have the subsidies resume by appropriating money for them, and Sens. Lamar Alexander (R-TN) and Patty Murray (D-WA) are negotiating an Obamacare fix that would include that, but they reportedly still have a long way to go to reach an agreement.
And Trump may still be open to a deal: “I will say the Democrats should come to me, I would even go to them,” Trump said Friday. “I’m only interested in one thing: getting great health care for this country.” But Mick Mulvaney, director of the White House Office of Management and Budget, said Friday that Trump would oppose a compromise along the lines of the one being negotiated. The question then is what else Trump might want in return.
Trump gambles with ObamaCare moves
Frustrated by Congress’s inaction on ObamaCare repeal, President Trump is taking a big political risk in using his authority to dismantle the health-care law piece by piece.
Democrats say Trump now owns ObamaCare, bearing responsibility for any problems that arise in the system, including higher premiums and insurer exits.
“Republicans in the House and Senate now own the health-care system in this country from top to bottom,” Senate Minority Leader Charles Schumer (D-N.Y.) said in a press call Friday.
“Their destructive actions and the actions of the president are going to fall on their backs.”
The administration announced late Thursday evening that it wouldn’t continue ObamaCare insurer payments, a decision that could come back to haunt Republicans politically.
Estimates from the nonpartisan Congressional Budget Office released in August indicated that premiums for the most popular ObamaCare plan would be 20 percent higher in 2018 and 25 percent higher by 2020 if the payments were canceled.
The administration had been making the cost-sharing reduction (CSR) payments — which compensate insurers for lowering the out-of-pocket costs for certain ObamaCare enrollees — on a monthly basis. Now, insurers are still on the hook to offer the discounts, but won’t be getting reimbursed for it.
“The claims that Trump had been sabotaging ObamaCare actually are true with this,” a conservative strategist said. “I don’t believe they were true before. I think Democrats were just yelling to yell, but in this particular instance you can actually say that, because this is going to lead to adverse selection, this will cause insurance companies to withdraw from the marketplaces, health insurance premiums will rise and people aren’t going to buy.”
Before Trump’s announcement, insurance carriers had already signed contracts to sell insurance on healthcare.gov in the next enrollment season, which starts Nov. 1.
Some insurers may try to exit markets before open enrollment starts, potentially leaving some counties without any ObamaCare insurers next year.
Still, many insurers had already hiked premiums for next year on the assumption the payments would get canceled. Some states have seen rate increases as high as 50 percent.
“The Trump administration and every Republican in Congress who lets him do this is now responsible for every rate hike people see for the foreseeable future,” said Brad Woodhouse, campaign director for pro-ObamaCare group Protect Our Care.
The decision to end the payments came the same day that Trump signed an executive order lifting restrictions on short-term insurance plans and allowing the expansion of association health plans. The impact will not be immediate, as agencies are directed to issue new regulations or guidance that will go through a comment period.
Experts have warned that order could undermine the stability of the marketplaces if healthier people move away from ObamaCare and into the cheaper, skimpier plans. Such an exodus would leave the ObamaCare markets with sicker, more expensive customers, driving up costs.
But the White House says ObamaCare is “imploding” because the law is simply not workable.
Officials also argued that it’s illegal for the administration to be making the CSR payments because it requires an appropriation from Congress. A court agreed with that assessment, and a case has been on hold in an appeal for months.
“ObamaCare is a broken mess. Piece by piece we will now begin the process of giving America the great HealthCare it deserves!,” Trump tweeted on Friday.
The Trump administration faced accusations that it was sabotaging ObamaCare even before the latest moves.
Health officials cut advertising for ObamaCare by 90 percent and also slashed funding for local and state groups that help enroll people in coverage. If fewer people sign up for ObamaCare this year, it would bolster Trump’s argument that the law is failing and should be repealed. Republicans hope to return to repeal legislation sometime next year.
But a large majority of Americans would rather see Trump make ObamaCare work. Nearly half of Republicans agree, while 43 percent say the White House shouldn’t help the Affordable Care Act (ACA), according to a Kaiser Family Foundation poll released Friday.
An August poll from the organization found that 60 percent of the public agreed that Trump and Republicans in Congress are responsible for any problems with the ACA moving forward.
“President Trump has made himself perfectly clear — he wants to undermine the ACA and doesn’t care who he hurts doing so,” said Sam Berger, a senior policy adviser with the liberal Center for American Progress.
“I don’t think there will any confusion among millions of Americans who is to blame.”
Conservative groups, meanwhile, frustrated with Congress’s inability to repeal ObamaCare, have praised Trump’s actions.
“Obamacare has resulted in fewer choices and massively higher costs for millions of Americans. The president’s actions are necessary to give the law’s victims access to more affordable coverage that better meets their needs,” Nathan Nascimento, vice president of policy at Freedom Partners said in a statement, referring to the executive order.
He continued: “While repealing Obamacare legislatively is the best way to provide relief, the president is right to take action to ease the law’s burden through solutions that don’t waste billions of taxpayer dollars propping up the collapsing law.”
Conservatives are quick to note that ObamaCare is still the law of the land, and that Republicans have not yet kept their promise to change that.
“Although this is a step in the right direction, it is no substitute for Congress keeping its promises to repeal ObamaCare,” Jason Pye, vice president of legislative affairs for FreedomWorks, said in a statement, referring to the executive order.
Other Republicans are unhappy with Trump’s actions and worry about its impact on the insurance markets.
“I will say that I am very concerned about the president’s executive order that was issued yesterday and his decision to do away with an important subsidy that helps very low-income people,” Sen. Susan Collins (R-Maine) said at an event Friday.
Nevada’s Republican Gov. Brian Sandoval called the decision to end the insurer payments “devastating.”
“It’s going to hurt people,” he said in an interview with the Nevada Independent.
“It’s going to hurt kids. It’s going to hurt families. It’s going to hurt individuals. It’s going to hurt people with mental health issues. It’s going to hurt veterans. It’s going to hurt everybody.”
President Moves to Weaken Health Care Law
Two new decisions would lead to higher health costs for older and sicker Americans.
A new executive order and a subsequent announcement on health care subsidies will shake up the insurance market.
President Trump has delivered a one-two punch to the Affordable Care Act (ACA). Late Thursday he announced the elimination of the subsidy payments to insurers that help lower-income Americans afford health care. That move came just hours after he signed an executive order that he says will promote more competition in the health insurance market.
The payments to insurers help fund subsidies that assist lower-income Americans in paying for deductibles, copays and other out-of-pocket health care expenses. The president had been threatening to cut off the subsidy payments for months.
The nonpartisan Congressional Budget Office had earlier estimated that if subsidy payments were withheld, premiums for individuals who buy the most popular health plans on the ACA health insurance marketplace would soar by 20 percent next year and 25 percent by 2020.
The president’s moves come just two weeks before the start of marketplace open enrollment. Insurers had threatened to abandon the marketplace if the subsidies were cut off. Some states have already signaled plans to challenge that action in court.
Congress has tried repeatedly over the past few months to repeal and replace the ACA. Thursday’s announcements are part of the president’s latest strategy to continue those attempts in the absence of congressional action. AARP has strongly opposed any repeal of the health care law.
The executive order directs the secretary of labor to consider expanding the ability of small businesses to form so-called association health plans. These plans may be able to avoid many state and federal insurance regulations. They could, for example, be exempt from the ACA rules that protect older Americans and people with preexisting health conditions from being charged far higher premiums as well as the ACA requirement to provide essential health benefits — such as emergency room care and mental health services.
The impact of these changes would potentially sting millions of older and sicker Americans. That’s because the new insurance options would likely attract low-risk individuals — who are generally healthier — leaving older, sicker people in the current individual market. Since those plans would be so heavily weighted with sick people, policyholders would pay significantly higher premiums.
“The order aims to create loosely regulated insurance plans that could provide skimpier benefits and cheaper premiums to young and healthy people, but that would make coverage more expensive for older people and those with preexisting conditions,” said Larry Levitt, senior vice president for special initiatives at the nonpartisan Henry J. Kaiser Family Foundation. “However, there are still a lot of unanswered questions about how this would all work and how much legal authority the administration really has.”
The order also paves the way for broader use of short-term policies that are not required to include essential health benefits nor cover people with preexisting medical conditions. Such short-term plans often serve as a bridge for people between jobs. Under the previous administration, individuals could buy the plans for only three months. The order would expand their duration to nearly a year.
And the president is asking the secretaries of labor, treasury, and health and human services to allow more businesses to use health reimbursement arrangements. Under the arrangements, businesses could use pretax dollars to reimburse employees for out-of-pocket medical costs and premiums.
Insurance premiums already are in place for 2018, and most insurers had anticipated the loss of the subsidy payments and set rates considerably higher to take that into account. Those that haven’t may ask state insurance commissioners to allow them to increase premiums.
ACA Cost-Sharing Reductions Help Low-Income Working Families
http://www.chcf.org/articles/2017/08/aca-costsharing-reductions
The Congressional Budget Office recently released an analysis of the potential consequences if the Trump Administration stops funding cost-sharing reductions (CSRs) on Affordable Care Act (ACA) health insurance marketplaces. A lot has already been said about the impact on premiums, federal spending, and consumer plan choice that the CBO projects would result. But what is often missing from the debate and the media coverage is a better understanding of who is helped by CSRs and what that help looks like. As the debate continues to unfold in the coming months, here are a few key facts to remember.
CSRs help working low-income families afford health care. In addition to monthly premiums, most consumers also pay deductibles and copays or coinsurance or both when they see the doctor or use other health care services. These out-of-pocket costs often keep people from seeking needed care, especially those without income to spare. The ACA sought to address this problem by enabling low-income consumers purchasing insurance through the marketplaces to enroll in “enhanced” health plans (we’ll call them CSR plans here). These plans reduce what consumers pay in deductibles, copays, and coinsurance without subjecting them to the higher premiums usually associated with plans that offer lower out-of-pocket costs.
In California, consumers are eligible for a CSR plan (PDF) through the state’s health insurance marketplace, Covered California, if they earn roughly $17,000 to $30,000 a year (for an individual) or $34,000 to $61,000 (for a family of four). (It’s important to note that CSRs are only available when consumers purchase silver tier plans.) The federal government pays health insurance companies directly to provide CSR plans on the exchanges. These are the payments the Trump Administration is threatening to stop.
About 670,000 Californians are enrolled in CSR plans. These are Californians who earn too much to be eligible for Medi-Cal but still may struggle financially. These families may not get health benefits from an employer, or if their employer offers health coverage, it may be unaffordable. According to the State Health Access Data Assistance Center, typical jobs among Californians who earn incomes that would qualify them for CSR plans include administrative assistant, retail and restaurant worker, home health aide, nursing assistant, and child care worker. Many receiving help from CSR plans are self-employed or work at small businesses. Self-employed Californians and individuals working for businesses with 50 or fewer employees disproportionately rely on insurance through Covered California with premium subsidies, according to this analysis from the UC Berkeley Center for Labor Research and Education (PDF). And nearly three-quarters of Covered California enrollees with premium subsidies are also eligible for cost-sharing reductions.
The map below shows the geographic distribution of Covered California enrollees in CSR plans; hover over each county to see the numbers.
CSR plans can shield consumers from hundreds or thousands of dollars in medical expenses in a given year. Some illustrations from Covered California:
- On average, CSR plans saved households $1,500 a year (PDF) on health care in 2016.
- A CSR plan lowers by $2,000 (PDF) what a consumer would pay for a common injury (a broken wrist), compared to a similar plan without CSRs.
- CSR plans are most valuable to consumers when the health threat is most extreme. Out-of-pocket expenses are most damaging when consumers experience a devastating illness or accident that leaves them needing a lot of medical care. Take a look at a Covered California consumer who earned $17,000 in 2016. With a CSR plan, the annual deductible was $75 versus $2,500 (PDF) for a similar plan without CSRs. The total out-of-pocket maximum was capped at $2,350 versus $6,800 without CSRs. In the event of a serious medical emergency or series of high-cost medical events, a CSR plan would have shielded that consumer from another $4,450 in expenses.
CSRs provide a stabilizing influence on the entire health care safety net. Low-income Californians often move back and forth between Medi-Cal and Covered California. In one year, their income is low enough to qualify them for Medi-Cal. In the next, they make a little more money and leave Medi-Cal for a Covered California plan. But to afford marketplace coverage, they need premium support plus the lower out-of-pocket costs provided by CSR plans. CSR plans support a broader system that helps provide a continuum of coverage for low-income Californians through changing life situations. That extra dose of stability not only benefits them, it benefits all of California.
HENRY KOTULA 