Threats to Affordable Care Act continue
The federal Affordable Care Act has survived a legislative attack, but threats live on as proposals to curb federal payments designed to keep premiums low continue.
Currently, the Affordable Care Act includes several provisions that reduce the cost of insurance for people purchasing health insurance on the individual market. In addition to providing premium tax credits that make monthly premiums more affordable, the law includes cost-sharing reduction (CSR) payments designed to reduce out-of-pocket costs for lower income consumers. Individuals or families earning less than 250 percent of the federal poverty level qualify for CSRs if they purchase at a silver-level health plan or above through an Affordable Care Act marketplace. Every month, issuers receive CSR payments to cover these costs. According to Centers for Medicare and Medicaid Services, 7 million people (a majority of all Marketplace enrollees) have qualified for CSRs in 2017, and the expected payout to insurers — if these payments continue—the Congressional Budget Office (CBO) estimates the cost of these payments at $7 billion in fiscal year 2017, rising to $10 billion in 2018 and $16 billion by 2027.
The next payment to insurers is due Aug. 21, which the government agreed to pay for now. The Trump Administration each month has debated whether to continue to issue CRSs payments for that month. Failing to make these payments would dramatically raise premiums in the individual market.
A CBO report released this week shows that elimination of CSR payments would have a significant impact on the stability of the individual market. If the Administration ends payments immediately, insurers will not receive the payments they were expecting to supplement the coverage they have already provided in 2017. Without an ability to adjust rates this year, insurers are expected to hike rates next year to account for the loss of CSR funding for the remaining months of 2017 and in 2018. The CBO projects that if CSR payments are not made next year, premiums in the individual market would increase by 20 percent in 2018 and 25 percent by 2020. Because the increase in premiums would be accompanied by an increase in federal government expenditures for premium tax credits, failing to pay CSRs would increase the federal deficit by $6 billion in 2018, and by a total of $194 billion over the next 10 years.