What Eliminating ACA Cost-Sharing Payments Means for You

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The Trump administration and both parties in Congress are playing a high stakes game of chicken, using a key feature of the Affordable Care Act as a bargaining chip.

The White House said today it will continue to fund subsidies needed to keep the Affordable Care Act alive—at least in the short term—in a bid to get Democrats to support a spending bill needed to keep the government open. But House Republicans are still challenging those subsidides in federal court, which could stop funding for them permanently. And it's unclear how long the White House will continue to support making those payments.

Stuck in the middle are insurers, who need to know soon whether those subsidies will continue before they commit to offering plans in 2018.

Also stuck: Consumers, millions of whom could lose a valuable but obscure feature of the ACA, face much bigger out-of-pocket costs or sharply higher premiums, or, in some places, could have no insurance options at all to choose from.

Healthcare As a Bargaining Chip

The subsidies at issue are called cost-sharing reductions. They currently help some 7 million lower-income Americans pay for out-of-pocket medical costs such as deductibles and co-pays for doctor visits or prescription drugs, which can add up to thousands of dollars per year.

Here’s why those subsidies are so important right now: Although insurers are required by law to pay for those out-of-pocket costs, the government reimburses the companies only after they front the costs. And the Trump administration and Congress haven't decided whether they will continue to permanently reimburse insurers for those payments.

That puts insurers in a bind because they must decide by June, or May in some states, whether to offer plans on the ACA exchanges next year or how to price them. And without a guarantee of continued government funding for those subsidies, many insurers are likely to pull out of some or all of the ACA marketplaces, leaving millions of people without access to insurance, says Deep Banerjee, an analyst at S&P Global Ratings.

Insurers who do opt to stay in the market will probably have to sharply raise their premiums to compensate for the reduced government support, according to a new analysis by the nonpartisan Kaiser Family Foundation.

It found that, nationally, insurers would have to hike premiums an average of 19 percent, though the impact would vary, from 9 percent in North Dakota to 27 percent in Mississippi.

The combined effect could have a devastating impact on many millions of people, especially those who have to come to rely on those cost-sharing subsidies to afford insurance.

How Cost-Sharing Helps Consumers

Almost 60 percent of the 11 million people who get health insurance through the ACA exchanges qualify for the cost-sharing subsidies, according to the Commonwealth Fund, a nonpartisan foundation that provides independent research on health and social issues.

That includes Pamela Sobstad, 56, a retail clerk in Milwaukee. The cost-sharing subsidies are designed especially for people like her: those who make too much to qualify for Medicaid but are still considered low-income. In 2017, that amounts to $11,800 to $29,700 per year for an individual and $24,250 to $60,625 for a family of four.

Before signing up for an ACA plan in 2015, she had gone almost two decades without seeing a doctor, she says. “I couldn't afford to pay the fee just to walk into a doctor's office,” Sobstad says.

After a routine checkup last year she was diagnosed with cervical cancer, and she had surgery to remove her cervix in February. Now she sees doctors as often as three times per week for scans and blood tests and takes medication to treat a thyroid condition. And, thanks to the ACA’s cost-sharing feature, she pays nothing for the doctor visits and as little as $1 or nothing for prescriptions. 

The way cost-sharing works is often invisible to consumers. When you enroll in an ACA Silver plan—one of the four categories of insurance plans sold on the exchanges—and input your income, you are automatically shifted into one that has lower deductibles and reduced co-pays. The Treasury reimburses health plans directly to offer those cost reductions. So you don’t see what you would have paid if you had not qualified.

But the savings can be dramatic, says Sara Collins, vice president of healthcare coverage and access at the Commonwealth Fund. For example, if you earn $35,000 per year— too much for a subsidy—you’d have a median $3,500 annual deductible. But if your income is $17,000 per year, with cost-sharing your deductible would be as little as $125 for the year.

Other out-of-pocket costs, such as co-pays and co-insurance that you pay each time you visit a doctor, would be a median $6,500 if you are in a Silver plan but didn’t qualify for a cost-sharing subsidy. But in a plan with cost-sharing reductions, you’d have to cover just $650 per year in out-of-pocket costs.

Sobstad says without that help, she would return to pre-ACA days. Back then she relied on free clinics to get her medication or went for months without filling a prescription.

Now she faces critical decisions about treatment for her cancer, including whether to have a hysterectomy to reduce the chances of a recurrence.

“Right now I feel good knowing that I have options for treatment. If I lose the ability to pay for my healthcare, then I won’t have any options.”

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