Consumers May See Immediate Impact From Loss of ACA Subsidies
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President Donald Trump’s decision to cut off subsidies to insurance companies could leave consumers buying Affordable Care Act insurance with higher premiums and fewer if any choices for affordable plans in 2018.
These subsidies, known as cost-sharing reductions (CSRs), are payments the government makes to insurers to help them make insurance affordable to low-income people.
Stopping the subsidies would cost insurers billions of dollars, potentially driving them out of the ACA markets or forcing them to raise premiums dramatically. Without subsidy payments for the rest of this year alone, ACA insurers would be on the hook for the nearly $2 billion that they expected would be reimbursed.
Q: I get my health insurance through the ACA now. Will this affect me this year?
It’s possible but not likely. If you get financial help to cover your out-of-pocket costs, you will continue to do so—insurers are obligated by law to cover that cost, even if they don’t get reimbursed for it. Your insurer also cannot change your present premium at this point, nor can it easily just pull out of the market this late in the year. “States have rules about exiting the market. It may be difficult for an insurance company to pull out this year since it is already offering your plan,” says Elizabeth Carpenter, a senior vice president at Avalere Health, a healthcare consulting company.
Q: What does this mean if I want to buy health insurance through the ACA in 2018?
You could have fewer or no insurers offering plans where you live. Insurers who want to sell ACA plans next year have already signed contracts with the federal government, even though the time when people sign up for plans doesn’t start till Nov. 1. Currently, every county in the U.S. has at least one insurer offering plans. But Carpenter says the loss of the subsidies for an entire year will be a big cost for those insurers who didn’t build the possibility of the CSRs evaporating into their pricing. They may drop out in future years as a result.
Q: Would some people on ACA plans be affected more than others?
Yes. How insurers react depends in part on where you live. While some insurers decided to hike premiums themselves over CSR uncertainty, some states required them to reflect the prospect of losing the payments in their 2018 premium pricing.
Just recently, California ordered its ACA insurers to tack on a 12.4 percent surcharge to Silver plans to cover CSR costs. That boosts the average increase on ACA plans sold in California to 25 percent. But those insurers are likely to feel more comfortable staying in the market because the cost of the CSRs will be covered by the higher premiums they charge.
Insurers who didn’t plan for the loss of CSRs may be more likely to drop out of the market altogether.
Insurers in your state are also more likely to have planned for big price spikes next year if your state didn’t expand Medicaid. Those 19 states will have a large number of marketplace enrollees who qualify for the largest cost-sharing reductions, says the Kaiser Family Foundation. So insurers in those states generally boosted 2018 premiums more than non-expansion states for fear the CSR funding would go away.
Q. How do these changes affect the type of insurance plan I choose?
It’ll be a more complicated decision. There are four types of ACA plans you can pick: Bronze, Silver, Gold, and Platinum. Bronze and Silver plans have the lowest premiums but higher deductibles and co-pays. Gold and Platinum plans have the highest premiums but lower out-of-pocket costs. For 2018, many insurers raised premiums the most on Silver plans because they are costliest to them. That’s because only individuals on Silver plans are entitled to the CSRs that insurers must pay.
This is where there is one good piece of news for consumers who qualify for a tax credit to buy ACA plans (84 percent of people do). Subsidies are based on the cost of a Silver plan, and because Silver plan premiums have gone up so much, subsidies will reflect that. A larger subsidy could make a Gold or Platinum plan more affordable. Depending on the size of your tax credit, your premium on a Bronze plan could even be zero. However, if you qualify for a CSR as well as a tax credit, you’ll probably be better off with a Silver plan because you’ll get help with out-of-pocket costs, too, Carpenter says.
Q: Can Congress do anything to help?
Yes. Congress could appropriate the money for the subsidies and restore the funds immediately. Both Republicans and Democrats have come out against ending the CSR payments. Bipartisan talks going on now in the Senate call for continuing the CSR payments, at least in the short term, as does a proposal issued this summer in the House. In a statement Friday, Sen. Patty Murray, D-Wash., who has been working with Sen. Lamar Alexander, R-Tenn., on a bipartisan plan to strengthen the ACA, said she believes “we can reach a deal quickly—and I urge Republican leaders in Congress to do the right thing for families this time by supporting our work.”
States are also taking action. On Friday, New York, Massachusetts, Kentucky, and California’s attorneys general announced that they would sue the Trump administration to preserve the payments. They say they are asking courts to declare that the subsidy payments are legal and want an injunction that would keep the funding flowing while the legal cases play out.
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