CMS Proposes Changes to ACA Premiums, Reducing Tax Credits

CMS is proposing more changes to the Affordable Care Act (ACA), including ways to seek to end the practice of silver loading, end automatic re-enrollment in individual exchange plans, and raise premiums by 1%, it said in its proposed 2020 Payment Notice.

In addition, the agency is proposing to require insurers that cover abortion to offer a similar plan that does not. The ACA allows insurers to offer coverage for abortions so long as they collect a separate premium to cover the cost. But many states have enacted laws that prevent ACA plans from covering abortion.

The agency is also looking to reduce the fee charged to insurers that participate in ACA exchanges, saying it would help reduce premiums.

“Following the first-ever drop in premiums for plans sold on the Federal Exchange for 2019, in another first CMS is proposing to reduce the Exchange user fee charged to insurers to fund Exchange operations,” CMS Administrator Seema Verma said in a statement. “Reducing this user fee will reduce the premium each consumer pays in 2020. Under President Trump’s leadership, we’re finally moving the Exchange and the market in a new and positive direction.”

In addition, the rule proposes allowing individual, small group, and large group market health insurance issuers to allow mid-year formulary changes to encourage more use of generic drugs. CMS would also change how issuers and self-insured group health plans treat cost sharing for brand drugs when a generic equivalent is available.

However, CMS also wants to raise the out-of-pocket maximum that those with employer-sponsored coverage would pay to $8200 annually, up $200. The maximum for family coverage would increase by $400.

The proposal would change a calculation that sets rates for those who buy exchange plans with premium tax credits. About 9 million Americans use the credits. The change would cause about 100,000 to not have coverage, according to a table in the 300-page document spelling out the changes.

The changes would lead to net premium increases totaling about $181 million, and the government would save $900 million.

Critics of the proposal said that it was more evidence that the administration was seeking to undermine the ACA. Andy Slavitt, who ran CMS under former President Barack Obama, said that banning silver loading would raise prices for everyone. He also criticized the possible end of autoenrollment, which he said is used by nearly 2 million people and protects them from being uninsured.

ACA premiums had been stable for the last year after soaring previously, driven by instability in the market amid the president’s decision to end cost-sharing reduction (CSR) subsidies in October 2017, which helped insurers keep premiums down for low-income people, as well as repeated threats to repeal the ACA.

As a result of the administration’s CSR decision, a “silver loading” phenomenon developed, where state regulators loaded the effects of the lost subsidies onto the silver plans, driving up their cost for Americans who don’t qualify for premium tax credits.

Because these credits are calculated as a percentage of premium costs, rising premiums meant rising credits, too, which allowed enrollees to get larger subsidies. The administration is seeking to end the practice, but would delay a decision until at least 2021.