CSR Updates

Two pieces of Cost Sharing Reduction subsidy news this morning.  First, we’ll start with the simple news.  Louise Norris reports that Colorado is switching from being a Broad Load state to a Silver Switch state.

 

Colorado will add cost of CSR to on-exchange silver plan premiums for 2019. Off-exchange plans & non-silver exchange plans won’t include the cost of CSR in premiums. https://t.co/NxfcAyDNzV Coverage will be more affordable for a lot of subsidy-eligible enrollees @EyeOnInsurance

— Louise Norris (@LouiseNorris) April 20, 2018

This means that CSR costs in Colorado will be put onto only Silver On-Exchange plans. Currently CSR costs were spread to all plans of all metals. Bronze and Gold plans will get comparatively cheaper to Silver (the interaction of pulling out CSR while also dealing with a much sicker risk pool due to new federal policy means I can’t estimate actual price levels.) Off-Exchange buyers will now be held harmless for CSR in the state.

Colorado was one of the five states that Broad Loaded for 2018. It is rational for the remaining broad load states to move to Silver Load.

Now here is the big deal:

In holding that the plaintiffs have a common set of legal claims, the court tentatively rejected the argument that plaintiffs’ damages would vary depending on whether they’ve mitigated those damages through silver-loading. pic.twitter.com/iHZbo8ePuL

— Nicholas Bagley (@nicholas_bagley) April 19, 2018

The insurers sued almost as soon as CSR payments were terminated.  They have a very strong case that the federal government promised payment for CSR and then reneged.  Nick thought that the courts would easily rule in favor of the insurers for the 4th quarter of 2017 where there was no ability to mitigate but going forward, Silver Loading would act as a mitigating factor to minimize total federal exposure.

If we assumed mitigation was relevant, than the CSR lawsuits were worth about $2 billion for 2017 and a lot less in 2018 as the vast majority of policies sold were under some type of mitigation effort.  Going past 2018, and assuming the CBO assumption that almost every state would Silver Load by 2019, mitigation would pretty much cancel out the termination of CSR.  If mitigation was relevant, the total net present value under dispute is easily under $5 billion dollars.  It is not nothing but it is an accounting error in federal budgetary terms.

The initial ruling makes mitigation irrelevant.  The net present value under dispute for the next decade could easily reach $100 billion dollars.  Now that is some real money.  Insurers could conceivably and legally double dip with premiums funding CSR and then the courts ordering CSR payments through the automatically appropriated Judgement Fund.

I am not a lawyer so I don’t know the likelihood of that ruling being reversed on appeal up to and including the Supreme Court.  I just know that there are going to be a lot billable hours.