Since Tax Credits are Based on Silver Plans, CSR Cuts Could Result in Cheap Bronze, Gold, and Platinum Plans… For those With Assistance
Trump’s move to cut Cost-Sharing Reduction assistance will likely result in lower premiums for those who qualify for Premium Tax Credits on Bronze, Gold, and Platinum plans.
This is true for 2018 open enrollment, and if no fix is hashed out, potentially true moving forward.
The logic isn’t easy to follow, but we present it below none-the-less.
Why Trump Cutting CSR Payments to Insurers Will Lower Premiums for ObamaCare Customers
- Tax credits are based on the Second Lowest Cost Silver Plans in your state.
- CSR assistance only applies to Silver plans.
- Insurers have to offer CSR even if they don’t get the CSR payments from the government.
- Trump said he wouldn’t pay the CSR payments (after having threatened this in the past).
- Insurers saw this coming and already increased premiums on Silver plans.
- Thus, the cutting of CSR will boost credits for Bronze, Gold, and Platinum plans for 2018 (and potentially beyond).
That is the gist. CSR premiums went up, so tax credits go up, so Bronze, Gold, and Platinum plans just got a lot cheaper for those with assistance.
This doesn’t do much to help those who need Cost-Sharing Reduction, as they will still want to get a Silver plan if they make between 100% – 250% of the poverty line. But it helps those making between 250% – 400% of the poverty line.
Of course, this is not good for those without assistance, as they will have to pay the premiums outright. However, it is pretty good for anyone who qualifies for cost assistance.
In other words, the result of this move is that the government will spend more money to subsidize people on the ObamaCare exchanges based on income and likely thus increase enrollment numbers on the exchanges (thereby creating an environment where the marketplaces/exchanges offer a better experience to more customers than ever).
That is, Trump may have just helped save ObamaCare (and raised costs for those not privy to it). IRONIC!
NOTE: Oddly, states can apply for waivers that let them set up whatever healthcare solution (like single payer) they choose. Since they can roll federal tax credits into their budgets, technically higher premiums (and thus more credits per user) means they have more funds to work with to pass single payer and other solutions.
Given the Above, Many Will Want to Consider Bronze, Gold, and Platinum Plans
The bottom line here is that in 2018 and beyond Bronze, Gold, and Platinum plans will likely be the best buys for families without the income that qualifies them for CSR assistance. Those plans will enjoy increased tax credits from the premium spike in Silver plans caused by cutting Cost Sharing Reduction (CSR) subsidy payments to insurers.
Thus, for this year, and potentially moving forward, a Bronze plan with an HSA, or Gold or Platinum plan without an HSA, could be an attractive buy for a family who doesn’t qualify for out-of-pocket assistance.
This is different than in past years when we would have suggested by default a marketplace Silver plan with an HSA.
WARNING: If Congress changes its regulations, this could change for years moving forward although it won’t change for 2018 since plans are already priced. At this point, there isn’t much anyone can do about the fact that high Silver plan premiums (caused by the threat of CSR) just made other ACA plans cheaper after assistance.