Clarifying Confusion About ACA’s CSR Payments | August 31, 2017

Dan Kuperstein

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There has been controversy and confusion recently surrounding the ACA’s cost-sharing reduction (or CSR) payments. ERISA Attorney Dan Kuperstein explains CSR payments, the latest CBO score, and what health insurers should do when preparing to file rates for 2018.

Cost Sharing Reduction (CSR)
Effects of Terminating CSR Payments
ACA(now) – News on Washington

Video Transcript: 
Hi, I’m Dan Kuperstein, and welcome to this episode of ComplianceMINUTE.

There has been quite a lot of controversy and confusion recently surrounding the ACA’s cost-sharing reduction (or CSR) payments. This confusion has only grown after two recent events:

  1. The Congressional Budget Offfice (or CBO) and the Joint Committee on Taxation, on August 15, 2017, released an analysis of the potential effects of a decision to terminate the ACA’s CSR payments; and
  2. A court decision on August 1, 2017 in the case of House v. Price to let state attorneys general proceed with their claims pertaining to the CSR payments.

To provide some background on the CSR payments, the ACA requires insurers to reduce out-of-pocket limits and increase the actuarial value of benchmark silver plan insurance coverage for individuals whose household income does not exceed 250 percent of the federal poverty level. The federal government has been reimbursing insurers with the CSR payments to cover this cost, since this requirement went into effect in 2014.

In late 2015, things got more complicated when the U.S. House of Representatives filed a lawsuit claiming that Congress had not appropriated money to fund the CSRs and that the payments were therefore unconstitutional. In 2016, a federal district court ruled for the House and enjoined the CSR payments. It stayed its order, however, and the Obama administration appealed the court’s ruling to the District of Columbia Circuit Court of Appeals. The Obama administration filed its opening appeal brief in the fall of 2016, but since then the case has been on hold. The Trump administration has refused to take a position on the legality of the CSR payments. The D.C. Circuit Court of Appeals recently allowed attorneys general from 18 states to intervene in the appeal to defend the CSR payments, but uncertainty remains.

The other big development is the CBO score. The CBO predicts that if the CSR payments are terminated, the big loser would be the federal budget, which would see a net increase in the deficit of $194 billion over the 2017 to 2026 budget window.

The CBO also predicts that termination of the CSR payments would increase premiums for silver plans by 20 percent above 2016 baseline projections in 2018, and by 25 percent in 2020. The CBO further predicts, however, that the premium increases would be covered in large part by increased premium tax credits. Enrollees eligible for a premium tax credit—which are people with incomes not exceeding 400 percent of the federal poverty level—would, therefore, not have to bear much of the increased cost of coverage and might in fact be able to purchase more generous coverage without additional cost. Individuals with incomes above 400 percent of the poverty level would experience no increase in premiums if they purchased coverage outside of the Exchanges.

Most recently, multiple credible media sources have reported that the White House has confirmed that CSR payments will continue to be made for the month of August. While this will lessen the financial impact on insurers of a CSR payment termination during 2017, this recent assurance does nothing to clarify for insurers or state insurance regulators what they should assume in determining which insurers will participate in the individual market and what premiums they will charge for 2018.

Health insurers offering qualified health plans through the Exchanges for 2018 must file their rates for 2018 by September 6, 2017. As no guidance has been offered as to whether CSRs will be paid in 2018 (or even in September 2017), state regulators should presumably instruct their insurers to file their rates based on an assumption that CSRs will not be paid, or at least to file two sets of rates – one set of rates that assumes that CSRs will be paid and one set that assumes that they will not be.

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