Last week, President Trump announced that he would not be continuing federal payments to insurers for cost-sharing reductions offered on the health insurance exchanges. These payments, known as cost-sharing reduction payments (CSRs), have been a major source of uncertainty in the Obamacare marketplace. Insurers responded by hiking premiums to compensate for the expected loss of income.
In an effort to continue payments, appease insurers and ensure that health insurance customers get access to affordable coverage, Senators Patty Murray (D-Washington) and Lamar Alexander (R-Tennessee) drafted a bill that would take over those payments rather than eliminate them altogether. Initially supportive of the bill, the president has changed his mind, claiming that these payments are “bailouts” for the insurance companies.
What Are CSR Payments?
They lower costs for individuals.
Under Obamacare, customers who buy health insurance on the exchanges and have incomes up to 400 percent of the poverty level can get financial help in the form of tax credits to lower premiums. For people who earn up to 250 percent of the poverty level, extra help is available in the form of cost-sharing reductions if they choose a silver-level health plan on the exchange. This is known as “extra savings,” and it helps lower co-payments, deductibles and coinsurance. In effect, people who qualify will see reduced out-of-pocket medical expenses for the year. Insurance companies must offer these reductions by law.
They offset costs for insurance companies.
Because insurers are required to offer cost-sharing reductions to lower-income customers on the exchanges, the federal government under Obamacare made payments to insurance companies each year. In 2017, cost-sharing reduction payments totaled an estimated $7 billion. It’s important to note that these payments aren’t bailouts as the president insists. They are reimbursements for money that insurers already spend on lower-income customers. Insurers aren’t making money with CSR payments.
What Does This Deal Mean For CSR Payments?
The senators’ deal could mean the revival of CSR payments through 2019, which helps defray healthcare costs for both Americans and insurance companies. This gives both consumers and companies a couple more years of predictability, and ideally it would defer increases in health insurance premiums that were likely to happen without it. Overall, it could help to stabilize the healthcare environment as a short-term solution.
The bill also makes an effort to promote enrollment for this year, something the Trump administration has been largely against. The draft includes $106 million in additional funding for outreach.
Other provisions in the bill include allowing states to offer reinsurance programs with government aid, which would help to offset insurance losses while decreasing costs for consumers; expediting the approval of 1332 waivers, which allow states to change their exchanges as long as it cuts costs; and letting adults over or under the age of 30 to enroll in “copper” plans, which are high-deductible, low-premium plans that provide basic catastrophic coverage.
What Challenges Does This Deal Face?
There is some concern that this bill could face opposition in Congress. Speaker of the House Paul Ryan has expressed that he would resist a bill like the one proposed. Other Republicans have stated that they don’t want to continue to provide what they believe are bailouts for insurance companies. But some analysts believe that the bill will get enough support from both parties to pass.
It’s also possible that this deal might not be enough to prevent higher out-of-pocket insurance costs. Americans could still see up to a double-digit rise in insurance premiums. While the increase should be less than if the CSR payments were completely eliminated, this could still mean a significant hike in rates for people, especially in counties where there’s only one option for insurance this year.