Cost-sharing subsidies avoid sequester's chopping block

An estimated $8 billion in cost-sheltering subsidies paid to health insurers under the Affordable Care Act have been shielded from cuts under the across-the-board federal budget sequester thanks to recent executive action by the Obama administration, according to the Committee for a Responsible Federal Budget (CRFB). This represents a policy change for the administration, which last year said the subsidies were subject to sequestration.

Another midstream change in how the Affordable Care Act works is sure to draw fire from President Barack Obama's opponents, according to The Hill's Healthwatch.    

The White House Budget Office unveiled the switch Monday in a sequestration order report documenting how the sequester will affect federal spending in fiscal year 2015. That report did not include Affordable Care Act cost-sharing subsidies on the list of programs the sequester will affect.

This change was first discovered by CRFB, which said the move "could be considered a big-time win for the [healthcare reform] law," since it translates to about $10 billion in restored cost-sharing subsidies over the next 10 years.

Cost-sharing subsidies aim to make healthcare more affordable (and health insurance more usable) for low- and moderate-income Americans by decreasing out-of-pocket expenses for medical copayments, deductibles and other costs.

What prompted the administration's policy change remains unclear, but it may stem from a Medicare precedent that explicitly spares Part D low-income cost sharing subsidies from sequestration, CRFB noted.

However, this exemption slightly increases the reduction percentage other programs will bear, including risk adjustment and reinsurance payments intended to protect payers from adverse selection in health insurance exchanges, the CRFB noted. These two programs face cuts of almost $1 billion in fiscal year 2015 due to the sequester. Moreover, the sequester would cut Affordable Insurance Exchange Grants to states by $61 million next year.       

For more:
- here's the sequestration order report (.pdf)
- read CRFB blog post
- see the Healthwatch article

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