There was some big news yesterday. The DC Circuit Court of Appeals allowed state attorney generals to become part of the current House v Price lawsuit as their interests were no longer being represented by the Trump Administration. This is the appeal over whether or not Cost Sharing Reduction (CSR) subsidies are appropriated. It is the last major element of blatant sabotage leverage for the Exchanges. Nicholas Bagley at the Incidental Economist has the mechanical and legal implications:
As I explained when the motion was filed, allowing the states to intervene will prevent the Trump administration from unilaterally dismissing its appeal in the case.
That’s a big deal. If the Trump administration wanted to stop making cost-sharing payments, the easiest way to do so would be to dismiss the appeal. The lower court entered an injunction to stop those payments, but put its injunction on hold to allow for an appeal. If Trump were to order the appeal’s dismissal, the injunction would spring into force, and the payments would end.
Now the states can keep the appeal alive, even if Trump wants to get rid of it….
The minimum needed win is for the states to keep the subsidies flowing through at least October, preferably November and ideally to the end of the year. After that, the lack of CSR will have been priced into plans. The CSR removal threat was always a time limited threat.
Moving to payment through Halloween but no payment for November and December, most insurers would have sufficient reserves to eat the loss and re-adjust their prices for 2018 while their lawyers get warmed up. Moving back another month, thinly capitalized insurers will start being in trouble as they may be hitting a Premium Deficiency Reserve (PDR) event that threatens their Risk Based Capital (RBC). At that point, some state regulators would be forced to either shut down insurers or allow insurers to terminate the CSR policies immediately. Well capitalized insurers could survive longer and jack up their rates for 2018 with state support.
The CSR threat loses its ability to blow up the market by sometime in the fall.
Senator Alexander (R-TN) wants CSR to be paid through the end of the fiscal year and then annual appropriations. Adrianna MacIntyre sees a SGR-like situation:
What on earth is the utility of appropriating them one year at a time? Nobody wants another doc fix https://t.co/yZntgFjep4
— Adrianna McIntyre (@onceuponA) August 1, 2017
The Sustainable Growth Rate (SGR) was a Medicare payment formula that attempted to reduce the amount doctors and hospitals got paid. Every couple of years, Congress would pass a “Doc Fix” that pushed the cuts back.
CSR could be SGR. And that might not be a bad thing. We are seeing states require their insurers to file rates with the assumption that CSR will not be paid. Most states are loading the lack of CSR onto only their on-Exchange Silver plans. This ups the premium of Silver by the sum of medical trend and CSR costs. Bronze, Gold and Platinum plans will only increase by medical trend. The benchmark plan that drives subsidies is now a Silver plan that is slightly less expensive than Platinum but more expensive than Gold. Charles Gaba calls this the Silver Switcheroo:
The silver enrollee could actually end up getting a Gold plan…which in turn would drop their deductible down from $3,500 to just $1,200!
Alternately, many….could end up getting a Bronze for nothing in premiums (they’d still have the high deductible, of course).
Getting into an equilibrium where CSR is appropriated/authorized every year but carriers can credibly claim that they can’t count on it until after rate filing season could be a backwards way of significantly upping the effective subsidy and the effective actuarial value without harming the off-exchange buyers.
Cheryl Rofer
[clears throat] attorneys general
Cheryl Rofer
The increases without CSR, and the reason for them, should be publicized. There was an article yesterday in the Santa Fe New Mexican.
randy khan
Given the choice between annual appropriations and nothing, I’ll take annual appropriations. Annual appropriations would allow Republicans to believe that they really, really will come up with an ACA replacement some day and therefore aren’t really enshrining the ACA as permanent policy, so I’d be willing to give them their fig leaf.
Sab
Do any Ohioans out there have a clue which side Mike deWine is on?
sheila in nc
Of course, part of the political problem still faced by the ACA is that there are too many non-subsidized buyers (in non Medicaid-expansion states) who cannot afford the Exchange offerings. Raising prices to cover lack of CSR doesn’t hurt subsidized buyers, but it kills people who make too much for Medicaid.
drdavechemist
I did a double-take this morning when the guest discussing CSR issues on the radio (can’t figure out whether it was Morning Edition or Marketplace) was David Anderson. Turns out you have a namesake who is CEO of one of the big New York State health insurers. FWIW, his main point was that insurers want stability more than any specific policy.
David Anderson
@sheila in nc: There is a second part of the Silver Switcheroo that holds harmless the off-Exchange buyers so they are no worse off than they are today.
Company X offers Silver Plan A on Exchange at a significant increase in premium. They have to offer Silver A off-exchange. But they also offer Silver B without the CSR load so Silver B is 20% to 25% less expensive than Silver A. No one who does not receive a subsidy buys Silver A. A lot of people buy Silver B
EW
I wouldn’t bank on CSR being priced into all plans. Things have to be locked and loaded for systems by September or October for OE. Switching rates that late is risky business, if the state DOI’s even allow it. Some states are also still in denial about the whole thing.