Indecision over CSR Payments Could Drive Up Trumpcare Rates

Health Insurance

June 12, 2017

Just within the last week, Anthem announced that they will be pulling out of 18 major counties within Ohio starting next OEP. That’s an acronym for “Open Enrollment Period”, the window of time in which consumers can enroll in a health insurance plan under Obamacare, and soon to be Trumpcare. Anthem took a departure from the messaging typically used in the past by other insurance carriers when they have pulled out of a market. Instead of blaming it on “continued losses from the ACA business” as most have, Anthem just directly said it was because of the continued politics and the mountain of unknowns that heaps on insurance carriers. The main unknown, is if the Trump administration will actually pay out the CSR payments that carriers are due.

Marketplace enrollees on Obamacare exchanges could see substantial premium hikes in 2018 thanks in large part to uncertainty over cost-sharing reduction payments. As insurers throughout the U.S. seek rate approval from state insurance departments, the numbers aren’t looking good for consumers with ACA marketplace plans. While some states could see rate increases as modest as 6.7 percent in 2018, many states could see double-digit hikes.

Insurers and others cite several factors for high increases next year, including rising drug and healthcare costs. In New York, insurance companies also complain that state-mandated coverage has contributed to the need for higher premium charges. But the biggest factor contributing to price hikes for 2018 is uncertainty over whether the federal government will continue to reimburse health insurance companies for lowering out-of-pocket costs for low-income enrollees.

Under the Affordable Care Act, tax credits exist to drive down premium costs for people who earn up to 400 percent of the federal poverty level. There’s also cost assistance available for people who earn up to 250 percent of the poverty level. These payments help people with low incomes afford copayments, deductibles and other out-of-pocket charges.

Companies have been factoring cost-sharing reduction payments (CSRs) into premium charges because the federal government reimburses insurers for these costs. In 2017, insurers expect to receive about $7 billion in CSR payments – a system that could end entirely based on actions by the current administration.

A legal snag currently stands in the way of securing cost-sharing reduction payments for 2018. Last year, House Republicans challenged the legality of CSRs because the Obama administration was reimbursing insurers using federal money that had not been approved by Congress. Their challenge was successful. Former President Obama and his administration appealed the decision, and the case has been on hold ever since.

On May 22, the Trump administration requested and gained a 90-day delay in having to pursue the issue for the time being. Indecision over CSR payments is wreaking havoc on insurer rates for 2018. Because health insurance companies depend on these payments to fund reductions for low-income enrollees, they may decide to forgo lower-cost plans and build increased pricing into premiums for next year. Some fear that insurers could pull out of the exchanges altogether to avoid absorbing added costs.

The Trump administration’s indecision over CSR payments could drive up premium rates next year by an average of 20 percent or more. Already, insurer filings reflect concern over the lack of payments. 

In Pennsylvania, rates could increase by 20.3 percent if CSR payments aren’t secured. BlueCross BlueShield of Western New York is seeking an increase of 48.8 percent. In North Carolina, BlueCross BlueShield has requested an increase of 22.9 percent. Anthem, which recently announced that it was withdrawing from the marketplace in Ohio for 2018, submitted a rate increase request of 33.8 percent in Connecticut. Not every state will see such drastic hikes, but industry-wide concern is definitely driving up costs for next year. Insurers have until June 21 to file their rate requests with the federal government.