Kaiser Family Foundation: Withholding CSR payments would increase premiums, federal spending

Affordable Care Act highlighted
The federal government would likely end up paying more if it withheld or eliminated cost-sharing reduction payments to insurers in the ACA exchanges. (Getty/Ellenmck)

The Trump administration’s plan to put pressure on Democrats to come to the table on healthcare reform and for this week’s budget discussions could backfire, according to a new analysis.

The White House has considered withholding cost-sharing reduction (CSR) payments from the Affordable Care Act’s marketplace as an effort to reel in reluctant Democrats, reported the Associated Press, but the Kaiser Family Foundation projected that a move like this could have disastrous consequences for the individual marketplaces and may end up costing the federal government more money in the long run.

KFF estimated that premiums for silver plans would rise by 19% and more payers are likely to exit the marketplaces if the CSR payments are withheld.

A number of high-profile exits, like those from Aetna and Humana, have already roiled the marketplaces, leaving some regions without any payers at all in their marketplaces. Premiums would rise by 15% in states that expanded Medicaid and by 21% in non-expansion states, according to KFF.

Significant increases in premiums for silver plans would also lead to an increase in premium tax credits to low income enrollees. The foundation estimated that, despite cost savings from eliminating the CSR payments, the federal government would still increase its spending by 23% due to higher tax credit payouts—and they added that this figure is likely an underestimate.

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For fiscal year 2018, this would be about $2.8 billion more in federal spending. Over a 10-year budget window, Kaiser Family Foundation estimated that the increased tax credits would cost the government $31 billion. These figures, though, depend on insurers staying in the ACA marketplace at all, which is unlikely amid uncertainty about the future of health reform.

"Either this ends up costing the federal government more money, or there's chaos that leads to people losing their health insurance," Larry Levitt, senior vice president for special initiatives at KFF and one of the study’s authors, told the AP. "This would hardly be an orderly transition to a new system."

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The White House has not made a final decision on the subsidies, according to the AP. Major healthcare industry groups have pushed the Trump administration to clarify its position on cost-sharing payments.

House Republicans sued the Obama administration over the subsidies, which they claimed were were illegally funded without approval from Congress. A federal judge has already ruled in favor of the House, but the case is currently on hold and it’s up to the Trump administration to determine how to proceed.

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