Trump Cuts CSR Payments, Here is What that Means
The White House announced that the Trump administration will no longer reimburse insurers for ObamaCare’s cost-sharing reduction subsidies.
This means starting next year individuals and families won’t be able to get out-of-pocket assistance, this does not affect plans this year or premium tax credits. With that said, a legal battle is likely.
UPDATE 2019: This rule was reversed, thus this information is now only historically relevant.
UPDATE: Those who have CSR assistance won’t lose assistance (as insurers technically still have to offer the assistance under Section 1402 of the Affordable Care Act; it is only that Trump said the government won’t pay for it). Please note, this does not affect Premium Tax Credits or other assistance. Also note, a potential fix is in the works in Congress. Things are uncertain right now, so this can be difficult to report on. Please keep an eye on the news as we enter open enrollment to better understand the implications for 2018 and Cost-Sharing Reduction Assistance. We’ll share the latest information as soon as we know.
Everything You Need to Know About Trump and CSR Payments
Here is everything you need to know about Trump cutting Cost-Sharing Reduction (CSR) assistance to insurers, individuals, and families:
- October 12, 2017, the White House press office announced Cost-Sharing Reduction payments to insurers would end immediately.
- ObamaCare’s Cost Sharing Reduction assistance lowers out-of-pocket costs for individuals and families who enroll in silver plans in the marketplace and have household incomes between 100% – 250% of the federal poverty level.
- Many who qualify for CSR assistance are sick, elderly, or low-income and will likely not have coverage options without this assistance.
- This means that starting immediately insurers will no longer be reimbursed for Cost-Sharing Reduction assistance provided to those who qualify for it. This does not mean CSR assistance will end immediately for those who use it.
- To be clear, those who get assistance now won’t lose it unless something else changes. Instead, although the effects are somewhat unclear, as it stands insurers will still have to offer assistance, but will have to eat the costs (as they won’t get reimbursed without action from Congress). This means for 2018 customers should still have access to CSR on Silver plans, but Silver plan premiums will be notably high for those without assistance (as insurers saw this coming and already priced this into plans).
- This will not affect Premium Tax Credits which lower premium costs.
- This will likely spike premiums next year. Meanwhile, this year insurers already factored the costs in (this is largely why premiums rose this year, as Trump had been threatening this if a repeal and replace plan didn’t pass). NOTE: Insurers eat the costs up-front and then the government pays them back, so they will be absorbing the cost of this.
- Since tax credits cap costs based on income on marketplace plans, increased premiums means more tax dollars spent subsidizing plans (it also likely means cheaper plans for those who qualify for Tax Credits). Trump claims this saves government payments to insurers, but it does not in some respects, as the payments will be made via tax credits. It shifts costs, and increases the burden on everyone who pays premiums without assistance… but there is a good chance this will actually cost the government and tax payers more money (not less).
- Congress can still pass a legislation to ensure the payments. Essentially Trump passed the ball to Congress (like he did with DACA).
- The reductions cost insurers around $7 billion a year currently. So the government saves $7 billion up front, insurers will need to absorb a few billion in losses up front, but the increased premiums and tax credits likely mean insurers will get profits back and the government will still spend. Meanwhile, those without assistance will feel the effects of increased premiums.
- The government is legally required to make these payments to insurers under the law (just like insurers are required to offer assistance). Likewise, as noted above, insurers are legally required to offer CSR. Thus, a legal battle seems likely (on all fronts). This is true, despite the controversy over past legal battles. Essentially Obama had to save CSR subsidies after they were struck down in Court, and like with DACA, this is why Trump was able to undo them at the executive level (thereby forcing Congress to act or not).
- Trump has told Democrats that they should call him to get “a fix” done. It seems Trump is using CSR payments as a bargaining chip to force Democrats to the table to debate healthcare (although, to be fair to Democrats, there has been very little effort to work with them… for example, the last few repeal and replace attempts were done with little-to-no outreach to Democrats and contained only GOP-penned provisions).
This move will certainly hurt millions of sick, low-income, and elderly who depend on CSR assistance, and this will certainly hurt insurers and will likely send premiums into a tailspin next year if this isn’t worked out before insurers price their plans. So time is of the essence whether we are talking about a fix, the human factor, a legal battle, or all of those things.
TIP: See a study from HHS that shows that cutting CSR payments will send the healthcare economy into a death spiral and a study from the CBO on the effects of cutting Cost Sharing Reduction assistance. It has long been known that CSR payments are a lynchpin of the ACA and that undoing them will cause chaos. This is why some accuse Trump and the GOP of actively trying to break ObamaCare.