One of the first potential blow-up points for the ACA in the Trump Administration was today. Insurers are required to offer lower deductibles and cost-sharing to people who buy on-Exchange policies and who make less than 250% of the Federal Poverty Level. This is the Cost Sharing Reduction (CSR) subsidy. Insurers offer the better product and the Federal government pays the insurers on the back end for the increased value of the Silver plan.
There is a lawsuit (House v. Burwell which will be renamed) that the District court judge ruled that the House’s argument that the CSR subsidies were discretionary spending that had not been appropriated was correct instead of accepting the Obama administration’s argument that the spending was mandatory and thus automatically appropriated. It has been appealed by the Obama Administration and once the administrations changed, the Appeals Court granted a delay in the appeal as the Trump lawyers figure out what they want to do.
However, the current CSR system where money goes out the door to pay insurers is based on administrative interpretation of the law. At any point in time, the Administration could decide to re-interpret the law and agree with the House that the funding is discretionary and that there is no money available to legally pay the insurers.
As I outlined in early January, this would blow up the Exchanges:
CMS in their 2017 QHP contracts allowed carriers to pull products from the market if the CSR subsidies disappear and it looks like that would be the plan of CHC to pull their Silvers….Carriers have to offer Silver plans to participate on Exchange. If they yank all of their Silvers, they have to yank everything on Exchange.
And carriers will flee if CSR disappears as they will not eat a 30% revenue loss for a high cost population in a market that they don’t know if it will be around long enough to actually make money on.
So far there is no executive order or administrative re-interpretation of the CSR funds.
This is good news. The markets and the plans survive for another month.
Elizabelle
It’s early. But we will take good news, where we find it.
Raoul
Good.
What I wonder in reading this is, if insurers offered and sold Silver subsidized plans with this structure in place, and now we are into month two of premium payments from the insured, what sort of unholy hell would be unleashed if the subsidies are administratively overruled in, say, March or April?
Are insurers on the hook to keep the plans thru 12/31 at considerable losses, or are large numbers of people left high and dry mid-year?
rikyrah
Thanks for the positive news, Mayhew.
MomSense
I’m a donkey on the edge!
Thanks, David for the info.
ArchTeryx
What I wonder is why they DIDN’T blow it up. This crowd may be a bunch of evil clowns, but they have a certain animal cunning.
So why didn’t they pull the trigger?
sukabi
@ArchTeryx: a couple of possible reasons….1) they (Senate repubs and drumpf crew) are too busy installing incompetent, unqualified billionaire assholes in the administration for the heist of the millennium…
2) haven’t gotten there yet.
Jerzy Russian
@ArchTeryx:
Perhaps sheer incompetence?
Ben Vernia
Am I correct that the February 21 date for apprising the D.C. Circuit of the Administration’s intention in House v. Burwell is a key date (assuming it doesn’t get postponed)?
sukabi
@Jerzy Russian: let’s hope that’s the reason…of course they could be like turkey farmers…gotta keep their product healthy long enough for the “big reveal”…
Chris
@ArchTeryx:
Give them time. It’s been a busy couple of weeks.
Villago Delenda Est
So, the apocalypse has been delayed for a month. Wonderful!
Raven Onthill
Likely enough the administration doesn’t know this. Also, the Trumpublicans are consolidating power and the shadowy figures advising Trump may not want to risk a yuge blow-up.
martian
@Raoul: I second this question. What happens to policies already sold? Who eats the cost, customer or insurers? Or do the insurers have an out to abandon the policy holders because the government’s breach of the agreement voids them?
Richard Mayhew
@Raoul: the insurers can cancel the contracts as soon as state law allows them to do so if CSR is yanked
David Anderson
@ArchTeryx: Fingerprints on the murder weapon.
Blowing up CSR leaves a lot of fingerprints. The GOP goal is to kill the ACA without getting blamed for it. That is why the 1/20/17 executive order tells HHS to use all discretion to waive as much as they can which really means issuing hardship exemptions to anyone who asks. That could kill the risk pool and drive insurers away in 2018 but the fingerprints are not bloody and they are not holding a smoking gun that everyone saw them fire.
CSR is bloody obvious what they did and who did it. It assigns blame straight up.
StringOnAStick
@David Anderson: Which path the rethuglicans take probably depends on how quickly they feel they are losing control over the situation.
feckless
Prophecy:
They will keep sending subsidy checks to the Insurance companies, long after the exchanges have been obliterated.
ProudGradofCatLadyAcademy
Dave:
What are the chances that the Insurers will not stand for the CSR being shredded and send in the lobbyists? I am thinking UHC will never stand for shenanigans of this sort for this year. We submit next year’s plans, rates and so forth pretty early in the current year to the states and the federal government. Our projected revenues would be so skewed for 2017 if they got rid of the CSR now. In 2018, that’s a different story.
@ Feckless funny you should mention that, without disclosing too much, let’s just say we got our hands slapped for constantly fixing APTCs for 2014 and 2015. Mostly because our billing systems and adequately trained agents leaves a lot to be desired. I shouldn’t complain because our failures in billing is exactly why I have a job, but I wish that it didn’t and our billing systems actually worked.
Graeme Murray
Here’s my healthcare story. I’m 71. I had a massive heart attack in 2008 and a 9 hour open heart surgery to replace valves in 2012, both with long hospital stays and rehabilitation. I have a pacemaker/ defibrillator. I see my family doctor every month and my cardiologist twice a year My family doctor sends me to specialists as required. I take 6 expensive little pills every day. I can get home care if needed. All this costs me nothing because I live in Canada and paid slightly higher taxes during my working life.