Tag Archives: House v. Price

Administration’s Ending Of Cost-Sharing Reduction Payments Likely To Roil Individual Markets

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http://healthaffairs.org/blog/2017/10/13/administrations-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.

The Latest Motion In House v. Price Has A Significant Impact On The Future Of CSR Payments

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http://healthaffairs.org/blog/2017/08/01/the-latest-motion-in-house-v-price-has-a-significant-impact-on-the-future-of-csr-payments/

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On August 1, 2017, the United States Court of Appeals for the District of Columbia granted the motionof the attorneys general of 17 states and the District of Columbia to intervene in House v. Price. House v. Price is before the D.C. Circuit on appeal from the ruling of a district court judge in favor of the House of Representatives in its lawsuit claiming that the reimbursement of insurers for reducing cost sharing for low-income qualified health plan enrollees is illegal because Congress had not appropriated funding for the payments. The judge enjoined the payments but stayed her order pending an appeal and the Obama administration in fact appealed. The states had moved to intervene, claiming that they had an interest in the action and that the Trump administration was not adequately defending their interest.

The three-judge appellate panel held first that the states had demonstrated that they had standing to intervene because they “would suffer concrete injury if the court were to grant the relief the plaintiffs seek.” The states established that a judgment for the House terminating the payments would “lead directly and imminently to an increase in insurance prices, which in turn will increase the number of uninsured individuals for whom the States will have to provide health care.” This would in turn result in state-funded hospitals suffering financially when they have to cover emergency care for uninsured individuals.

The court further held that the states had established a right to intervene in the action. First, the states had established an interest in the subject matter of the lawsuit.

Second, the court held that allowing the injunction of the court below would impair the states’ rights. The court observed that the administration’s “claim that it could unilaterally suspend payments is a debated legal question, not an answer to the injury the States have evidenced. The injunction sought, which would forbid the payments at issue, would erect a roadblock to the States’ goal of either persuading or compelling the Department to make the payments.”

Third, the court held that the states had raised a sufficient doubt concerning the adequacy of the administration’s representation of their interest. The court noted that the administration had nowhere argued that it would protect the states’ interest or continue to pursue the appeal.

Fourth, the court held that the motion to intervene was timely. The states, the court held, “had filed within a reasonable time from when their doubts about adequate representation arose due to accumulating public statements by high-level officials both about a potential change in position and the Department’s joinder with the House in an effort to terminate the appeal.” The court, in short, took President Trump’s threats to terminate the cost-sharing reduction (CSR) payments seriously.

Finally, the court held that permissive intervention was also warranted in the case.

The court further ordered that the case would continue to be held in abeyance, with status reports at 90-day intervals and the next one due on October 30, 2017. With their status as parties to the case, however, the states may well next seek to get the case moving again.

The decision does not mean that the Trump administration is barred from ending the cost-sharing reduction payments. It does mean, however, that the administration cannot unilaterally stop the CSR payments, dismiss the appeal, and claim judicial imprimatur for its doing so. If the administration does stop making the payments, the states—or insurers, or possibly consumers—would be able to sue to require the payments to be made and the injunction entered by the lower court would not be as much of a “roadblock” to their prevailing. Finally, if the states ultimately convince the appellate court that the CSR funding has in fact been appropriated, the administration would be required to pay it. The decision is, therefore, a major development in the ongoing CSR saga.

What Could Happen If The Administration Stops Cost-Sharing Reduction Payments To Insurers?

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http://healthaffairs.org/blog/2017/08/02/what-could-happen-if-the-administration-stops-cost-sharing-reduction-payments-to-insurers/

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Although the decision of the Court of Appeals for the District of Columbia Circuit to allow attorneys general from 17 states and the District of Columbia to join the House v. Price cost-sharing reduction (CSR) litigation as parties complicates President Trump’s ability to simply stop the CSR payments, rumors continue that he is preparing to do so. The CSR payments are made monthly; the next installment is due on August 21, 2017. If the administration intends not to make the August payment, it must announce its decision soon.

Changes to qualified health plan (QHP) applications in the federally facilitated exchange (FFE) are due on August 16, 2017, as are final rates for single risk pool plans including QHPs. Final contracts with insurers for providing QHP coverage through the FFE must be signed by September 27. If the Trump administration is going to defund the CSRs, now is the time it will do it.

The back story on the CSR issue can be found in my post on July 31, while the intervention decision is analyzed in my post on August 1. This post focuses on issues that will need to be resolved going forward if the Trump administration decides to defund the CSRs.

The Choices Insurers Would Face If CSR Payments Were Ended

First, insurers would have to decide whether to continue to participate in the exchanges. Those in the FFE have a contractual right to drop participation for the rest of 2017, but how exactly they would do this would depend on state law, and would probably require 90 days notice. Insurers would also not be able to terminate the policies of individuals covered through the exchange, although once the insurers left the exchange premium tax credits would cease and many policyholders would drop coverage. Insurers that tried to leave immediately would likely suffer reputational damage, and those that could financially would likely try to hold on until the end of the year.

Some insurers might well decide that the government is an unreliable partner and give up on the exchanges for 2018. Indeed, some would conclude that the individual market is too risky to play in at all. The individual market makes up a small part of the business of large insurers; even though it has become more profitable in the recent past, some insurers might conclude that the premium increases that would be needed to make up for the loss of the CSRs would drive healthy enrollees out of the individual market. Rather than deal with a deteriorating risk pool, they might leave the individual market entirely (although they would probably have to give 180 days notice to do so.)

Insurers that decide to stay would have to charge rates that would allow them to survive without the $10 billion dollars the CSR payments would provide. They would need to raise premiums significantly to accomplish this. How they did so would depend on guidance that they got from their state department of insurance or possibly from the Centers for Medicare and Medicaid Services.

The California Experience

On August 1, 2017, Covered California announced its 2018 rates. The California state-based marketplace is an example of how the Affordable Care Act can work in a state that fully supports it and has a big enough market to form a balanced risk pool. For 2018, the average weighted rate increase in California is 12.5 percent, of which 2.8 percent is attributable to the end of the moratorium on the federal health insurance tax. Consumers can switch to plans that will limit their rate change to 3.3 percent in the same metal tier. All 11 health insurers in California are returning to the market for 2018 (although one insurer, Anthem, is leaving 16 of the 19 regions in which it participated for 2017) and 82 percent of consumers will be able to choose between three or more insurers. About 83 percent of hospitals in California participate in at least one plan.

Covered California instructed its insurers to file alternate rates that would go into effect if the Trump administration abandons the CSR payments. The insurers were instructed to load the extra cost onto their silver (70 percent actuarial value) plans, since the CSRs only apply to silver plans. The alternative rates filed by the insurers project that if the CSRs are not funded, they would have to essentially double their premium increases, hiking premiums by an additional 12.4 percent.

Virtually all of this increase would be absorbed by increased federal premium tax credits for those with incomes below 400 percent of the federal poverty level. As the premium of the benchmark second-lowest cost silver plan increased, so would the tax credits. A Covered California study concluded that the premium tax credit subsidy in California would increase by about a third if the CSR subsidies are defunded.

Bronze, gold, and platinum plan premiums would not be affected by the silver plan load. As the premium tax credits increased, many more enrollees might be able to get bronze plans for free, and gold plans would become competitive with silver plans in price. More people would likely be eligible for premium tax credits as people higher up the income scale found that premiums cost a higher percentage of their household income.

Consumers who are not eligible for premium tax credits would have to pay the full premium increase themselves. Covered California has suggested, however, that insurers load the premium increase only onto silver plans in the exchange, since CSRs are only available in the exchange. Insurers would likely encourage their enrollees who are in silver plans in the exchange to move to similar products off the exchange that are much more affordable. Bronze, gold, and platinum plans would cost more or less the same on or off the exchange.

Other States Would Likely Make Different Choices Than California’s

It is likely that not all states would follow California’s lead. If state departments of insurance do not allow insurers to increase their premiums, more insurers would leave the individual market. If state departments require insurers to load the CSR surcharge onto all metal-level plans, both on and off the exchange, bronze, gold, and platinum plans would be more expensive and individual insurance would become much more costly for all consumers who are not eligible for premium tax credits. If insurers leave the market or consumers drop coverage, more consumers would end up using care they cannot afford, increasing medical debt and the uncompensated care burden of providers, and of hospitals in particular.

Some insurers in other states have likely already loaded a substantial surcharge onto their 2018 premiums in anticipation of CSR defunding and of other problems, such as uncertainty about the Trump administration enforcing the individual mandate. If insurers in fact profit from excessive rates, consumers might eventually receive medical loss ratio rebates, but 2018 rebates would not be paid out until late in 2019, if the requirement is still on the books by then.

Other Ramifications Of Ending CSR Payments To Insurers

CSR defunding could have other effects as well. Insurers have been reimbursed each month for CSRs based on an estimation of what they are paying out to actually reduce cost sharing. Each year the insurers must reconcile the payments they have received with those they were actually due. Insurers were supposed to have filed their reconciliation data for 2016 by June 2, 2017, and were supposed to be paid any funds due them, or to refund overpayments, in August. Reconciliation payments may also be due in some situations for 2015. If the administration cuts off CSR payments, it could conceivably cut off reconciliation payments as well.

Finally, defunding of CSRs would likely have an effect on risk adjustment payments as well. The risk adjustment methodology has been set for 2018 in the 2018 payment rule. It would likely not be amended for 2018 in light of the CSR defunding. Defunding would increase the statewide average premium on which risk adjustment payments are based. This would generally exaggerate the effects that risk adjustment would otherwise have. In particular, insurers with heavy bronze plan enrollment would end up paying more in, while insurers with more gold or platinum plans might receive higher payments.

Looking Forward

President Trump claims to see the CSR payments as a “bailout” to insurers, which surely they are not. They are a payment for services rendered, much like a Medicare payment to a Medicare Advantage plan. The effects of defunding would reverberate throughout out health care system, likely causing problems far beyond those identified in this post.

Fortunately, Senators Alexander (R-TN) and Murray (D-WA), the chair and ranking member of the Health, Education, Labor, and Pensions Committee, have announced that they will begin hearings on a bipartisan approach to health reform when the Senate returns in September, and funding of the CSR payments for at least a year seems to be at the top of their list. A bipartisan group of House members has also called for funding the CSRs. And pressure to fund the CSRs continues from the outside, with the National Association of Insurance Commissioners calling for it again last week. It is to be hoped that President Trump will not take steps that would sabotage the individual market and that a solution can quickly be found to the CSR issue that will bring stability to the market going forward.

 

The Latest Motion In House v. Price Has A Significant Impact On The Future Of CSR Payments

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http://healthaffairs.org/blog/2017/08/01/the-latest-motion-in-house-v-price-has-a-significant-impact-on-the-future-of-csr-payments/

On August 1, 2017, the United States Court of Appeals for the District of Columbia granted the motion of the attorneys general of 17 states and the District of Columbia to intervene in House v. Price. House v. Price is before the D.C. Circuit on appeal from the ruling of a district court judge in favor of the House of Representatives in its lawsuit claiming that the reimbursement of insurers for reducing cost sharing for low-income qualified health plan enrollees is illegal because Congress had not appropriated funding for the payments. The judge enjoined the payments but stayed her order pending an appeal and the Obama administration in fact appealed. The states had moved to intervene, claiming that they had an interest in the action and that the Trump administration was not adequately defending their interest.

The three-judge appellate panel held first that the states had demonstrated that they had standing to intervene because they “would suffer concrete injury if the court were to grant the relief the plaintiffs seek.” The states established that a judgment for the House terminating the payments would “lead directly and imminently to an increase in insurance prices, which in turn will increase the number of uninsured individuals for whom the States will have to provide health care.” This would in turn result in state-funded hospitals suffering financially when they have to cover emergency care for uninsured individuals.

The court further held that the states had established a right to intervene in the action. First, the states had established an interest in the subject matter of the lawsuit.

Second, the court held that allowing the injunction of the court below would impair the states’ rights. The court observed that the administration’s “claim that it could unilaterally suspend payments is a debated legal question, not an answer to the injury the States have evidenced. The injunction sought, which would forbid the payments at issue, would erect a roadblock to the States’ goal of either persuading or compelling the Department to make the payments.”

Third, the court held that the states had raised a sufficient doubt concerning the adequacy of the administration’s representation of their interest. The court noted that the administration had nowhere argued that it would protect the states’ interest or continue to pursue the appeal.

Fourth, the court held that the motion to intervene was timely. The states, the court held, “had filed within a reasonable time from when their doubts about adequate representation arose due to accumulating public statements by high-level officials both about a potential change in position and the Department’s joinder with the House in an effort to terminate the appeal.” The court, in short, took President Trump’s threats to terminate the cost-sharing reduction (CSR) payments seriously.

Finally, the court held that permissive intervention was also warranted in the case.

The court further ordered that the case would continue to be held in abeyance, with status reports at 90-day intervals and the next one due on October 30, 2017. With their status as parties to the case, however, the states may well next seek to get the case moving again.

The decision does not mean that the Trump administration is barred from ending the cost-sharing reduction payments. It does mean, however, that the administration cannot unilaterally stop the CSR payments, dismiss the appeal, and claim judicial imprimatur for its doing so. If the administration does stop making the payments, the states—or insurers, or possibly consumers—would be able to sue to require the payments to be made and the injunction entered by the lower court would not be as much of a “roadblock” to their prevailing. Finally, if the states ultimately convince the appellate court that the CSR funding has in fact been appropriated, the administration would be required to pay it. The decision is, therefore, a major development in the ongoing CSR saga.