States and health insurers received new guidance from the Centers for Medicare & Medicaid Services (CMS) May 2 on how to prepare should Congress fund cost-sharing reduction (CSR) payments or extend the Affordable Care Act (ACA) premium tax credit subsidies.
One notice (PDF) suggests Congress could choose to appropriate funds toward CSR payments, which would be a reversal from President Donald Trump’s decision to defund CSRs in 2017.
There has been an intense spotlight on whether the Trump administration will support extending enhanced subsidies set to expire at the end of the year. Now, it appears Senate Republicans may prefer to appropriate CSRs to reduce the deficit and fund other health priorities this year, said Wesley Sanders, founder of ACA health plan consultancy firm Evensun Health, in a blog post May 6. By appropriating funds, Trump would not be able to once again defund CSRs unilaterally.
“I don’t pretend to know anything about the conversations happening in the House and Senate right now,” he wrote. “However, we do know that they want to cut taxes while dealing with the constraint of budget reconciliation, which limits how much the deficit can increase. So, anything that can save money is going to be on the table.”
Quality health plans abiding by CSRs are required to reduce costs for eligible, low-income beneficiaries—through lower deductibles, copays and out of pocket maximums, for example—and then the federal government would send payments to health plans. But once these payments stopped, health plans increased premiums to cover the costs.
Insurers increased premiums, at the instruction of states, predominantly for individuals with silver plans, through a term called “silver loading.”
“For example, some states instruct issuers to add a load factor on exchange silver plans in excess of 40%,” said Peter Nelson, deputy administrator and director of the Center for Consumer and Insurance Oversight in a separate bulletin (PDF). “This load can leave unsubsidized enrollees purchasing coverage both on and off the exchange with silver plan premiums significantly higher than those plan premiums would have been otherwise.”
The notices by CMS only add to the uncertainty for carriers in recent weeks, said Sanders in an email to Fierce Healthcare.
“That said, if CSRs are funded and American Rescue Plan Act (ARPA) subsidies expire in the same year (which is the alternate scenario CMS asked issuers to include in rate filings), the total subsidy dollars drop dramatically and that will further reduce total enrollment in the ACA,” he explained. Enrollment would drop partly because the availability of $0 premium plans would decrease.
The White House and Republican congressional leaders are currently in discussions on how best to proceed with passing a reconciliation bill. So far, the approved budget resolution framework calls for $880 billion in cuts from the House Energy and Commerce Committee’s jurisdiction, likely resulting in significant reduced spending to Medicaid. Trump has maintained the program won’t be cut and only waste, fraud and abuse will be addressed, while Republicans are increasingly wary of touching the program for fear of political ramifications in their home states.
CSR loading can be codified into law if “actuarily justified” and if plans do not already receive enhanced subsidies, according to a rule finalized in the last days of the Biden administration.