Will Cost-Sharing Reimbursement Proposal for Insurers Help or Hurt Consumers?

A nonpartisan research institute said that 2 analyses released this week from the Congressional Budget Office (CBO) show that legislation to reinstate cost-sharing reduction (CSR) payments to insurers and provide federal funding for state reinsurance programs would have a number of harmful effects on Americans.

Sponsors of the legislation—Senate Health Committee Chairman Lamar Alexander, R-Tennessee; Senator Susan Collins, R-Maine; Senator Lindsey Graham, R-South Carolina; Senator Mike Rounds, R-South Dakota; and Senator Lisa Murkowski, R-Alaska—held a press conference Wednesday morning about the bill, which was left out of the omnibus spending bill that must be passed by midnight Friday in order to prevent another government shutdown.

Alexander has said that his proposal could cut premiums by as much as 40%, using the hypothetical example of a self-employed plumber making $60,000 who pays $20,000 a year for insurance.

After releasing its first estimate, the CBO released a second estimate at the request of Alexander, Health Affairs reported.

The first estimate assumed that the CSR payments, which President Donald Trump halted last fall, were still being made. The CBO and the Joint Committee on Taxation said that enacting the Bipartisan Health Care Stabilization Act of 2018 would increase the deficit by $19 billion over 2018-2027 relative to the CBO’s baseline. The reduction in premiums would mainly benefit people with incomes more than 400% of the federal poverty level (FPL).

That led to an “unrealistic assumption,” Health Affairs noted.

The second request for information asked for a cost estimate noting that the CSR payments had stopped. That found that there would be a deficit reduction of $29 billion, mainly from smaller subsidies for health insurance bought through Affordable Care Act (ACA) marketplaces by consumers with incomes between 200% and 400% of the FPL.

According to the Center on Budget and Policy Priorities (CBPP), the legislation would:

• Increase the number of uninsured Americans, which suggests that the bill could also worsen the individual market risk pool.
• Reduce premiums for middle-income consumers while increasing premiums and out-of-pocket costs and lowering coverage among moderate-income consumers with somewhat lower incomes.

Another organization, Families USA, agreed with that assessment, saying earlier this month that restoring the CSRs without also increasing advance premium tax credits would have the counterintuitive effect of raising healthcare costs for more than 2 million low- and middle-income consumers because of a phenomenon called “silver-loading.”

The Trump administration’s decision last fall to stop making CSR payments to insurers ended up decreasing costs for many moderate-income consumers because of that phenomenon, both CBPP and Families USA said.

CSR payments were intended to compensate insurers for providing lower-income consumers with silver-level ACA plans. But when CSR payments stopped, insurers, which were still required to offer the reimbursements, mostly defrayed their costs by charging higher silver plan premiums to everyone, instead of spreading the costs among all metal plans.

Silver plan premiums—and accompanying premium tax credits—increased more rapidly than bronze or gold plan premiums for 2018, CBPP said, which meant that many subsidized consumers purchased bronze plans with very low net premiums or purchased lower-deductible gold plans for less than they paid last year for silver plans.

According to the CBO analysis sent to Alexander, appropriating CSR payments for 2019 through 2021 would, on net, reduce the deficit by $32 billion over the 2019-2027 period. The number of uninsured people would increase by less than 500,000 in 2019 and by between 500,000 and 1 million in 2020 and 2021.

Most of those uninsured people would have incomes between 200% and 400% of the FPL (about $24,000 to $48,000 for a single adult). This group is typically eligible for tax credits but not for significant cost-sharing assistance.

At the press conference, Alexander said his bill could still come up for a vote. But overall, the Republicans were angry, saying Democrats were setting them up for blame for premium increases in October, all because of a dispute over restrictions on abortion funding, known as the Hyde amendment.

"The premiums are going to go up for no good reason," said Graham.

Separately on Wednesday, the White House is expected to release a report through its Council of Economic Advisors that says based on their stock prices, health insurers have adjusted to the ACA and benefitted from the tax reform act passed at the end of last year, which may hurt any effort to include federal funds for the industry in any spending bill plan this week, The Wall Street Journal reported.