CBO: Ending cost-sharing reduction payments will increase premiums, federal deficit

If the Trump administration stops funding cost-sharing reduction payments, silver-plan premiums on the Affordable Care Act exchanges will rise considerably and the federal deficit will increase, the Congressional Budget Office said Tuesday.

Officially, the administration remains undecided about how long it will continue making CSR payments, which are at the center of a federal court case that challenges their legality. Many insurers have had to factor this uncertainty into their preliminary rate filings.

To map out the consequences of one possible move by the administration, the CBO examined what would happen if federal officials announced at the end of August that they would continue CSR payments through the end of the year but discontinue them after that.

That policy would result in silver-plan premiums rising by an average of 20% in 2018 and 25% by 2020, the CBO estimates. Because tax credits rise in tandem with premiums, most eligible enrollees would not pay higher rates than they would if CSR payments continued—though the report also notes that overall, “the share of people facing slight increases would be higher during the next two years.”

Since more people would likely receive premium tax credits and in greater amounts, the CBO predicts that ending CSR payments would raise the federal deficit by $6 billion in 2018, $21 billion in 2020 and $26 billion in 2026. From 2017 through 2026, the federal deficit would rise by $194 billion as a result of implementing the policy.

The CBO also predicts that ending CSR payments would cause some insurers to exit the individual marketplaces, leaving about 5% of people living in areas that have no ACA exchange insurer in 2018. However, the agency predicts that more insurers would likely return to the exchanges in 2020 after having adjusted to the new policy.

Overall, the number of uninsured people would be slightly higher in 2018 but slightly lower starting in 2020 under the scenario the CBO examined, per the report.