Executive announcement to end cost sharing reductions

[MichaelB]

When this topic was first introduced no details were available, we assumed there would be additional announcements or instructions. This is not the case. Effective immediately, the federal gov’t has announced it will stop reimbursing health insurers for the cost sharing reductions in the silver exchange plans.

How will this impact us? We don’t know. This measure is directed toward insurers, not consumers, and does not affect in any way the premium tax credit.

Anyone wanting to know more about what Cost Sharing Reductions are can find a good summary here. https://www.kff.org/health-costs/issue-brief/cost-sharing-subsidies-in-federal-marketplace-plans/ Cost sharing affects approximately 58% of all exchange users, and cost around $7B this year (source Commonwealth Fund)

Here are links to some helpful analyses on the impact of this measure

- CBO analysis https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/53009-costsharingreductions.pdf

- Commonwealth Fund Eliminating Cost-Sharing Reductions in ACA - The Commonwealth Fund and One-two punch to the health insurance marketplaces and the people they cover - The Commonwealth Fund

- Kaiser Health https://www.kff.org/health-reform/i...le-care-acts-cost-sharing-reduction-payments/

- Health Affairs blog A Fateful Thursday For The ACA: Likely Effects And Legal Reactions

This Baloon-Juice link looks at how different states are responding https://www.balloon-juice.com/2017/10/12/csr-wont-be-paid/

It is safe to assume insurers will not offer the same CSR-subsidized policies at the same price next year. They will either withdraw those policies, increase the price on those policies, or increase the price on all policies.

We can assess how this impacts us and what alternatives we have. As always, let’s avoid partisan politics and snark, and stay focused on insurance. Some states have already informed policyholders how this will affect 2018 policies, those affected can share that info with the rest of us.

 

[bmcgonig]

This is what I received from Covered CA. Interesting how they worked with insurance companies to only add a surcharge to the silver plans.



"We know there is confusion about last night’s decision by the federal government to stop select reimbursements to insurance companies. These reimbursements support subsidies for lower-income consumers known as Cost Sharing Reduction (CSR) payments.*


Despite this action, Covered California members will not see any change in their health costs for the remainder of 2017 and the rates and out-of-pocket costs published by Covered California for 2018 will not be affected.


How can stopping the funding for CSR payments not affect insurance prices? It’s because this cut to one subsidy will trigger an automatic increase in other kinds of financial support.


The CSR payments to health insurance companies the federal government is eliminating are designed to help with out-of-pockets costs, like deductibles and co-pays.


These CSR payments don’t go directly to eligible Covered California members, instead health insurance companies lower the costs of some out-of-pocket expenses for eligible Californians, and then the insurers get reimbursed for that expense.


Even without CSR reimbursements, insurance companies are still required to help eligible Covered California members with their out-of-pocket costs. That’s a requirement of the Affordable Care Act and this requirement has not been halted.


The Affordable Care Act also includes another, larger type of subsidy that is specifically designed to reduce the cost of premiums, ensuring that family budgets are largely unaffected. That subsidy or premium assistance is called the Advance Premium Tax Credit (APTC).


The CSR payments that the federal government is eliminating only apply to certain silver plans. Covered California has already taken steps to minimize the impact of the loss of CSR funding and worked with insurers to price plans accordingly to ensure stability in 2018, adding a premium surcharge only to silver plans.* Silver plans are the basis for the amount of premium assistance, APTC, consumers receive, so an increase in silver premium will be offset by an increase in APTC for most consumers.**

Because the surcharge will only be applied to Silver-tier plans, nearly four out of five consumers will see their actual monthly premiums stay the same or decrease, since the amount of premium assistance they receive will also rise.


The effect of the federal government’s decision is something like this: Insurers get less money for helping low-income people with out-of-pocket costs on silver plans; premiums on silver plans increase more to compensate; and that forces the federal government to increase all APTC based subsidies to make sure people can still afford insurance.*"

Edit to add that my silver plan went from 1002/month to 1378/mo.

 

[GrayHare]

Am I understanding correctly that the Cost Sharing, quoted at $7 billion, reflects how much the insurers are collecting from the Federal Government during 2017? Spread across the 300 million US population that's less than $24 per person.

 

[CardsFan]

Am I understanding correctly that the Cost Sharing, quoted at $7 billion, reflects how much the insurers are collecting from the Federal Government during 2017? Spread across the 300 million US population that's less than $24 per person.

True, but you really can only factor in those actually signed up for ACA. Depending on your source probably 8-10 million. The rest are on different plans that are not tied to any cost factors in the ACA (medicare, employer paid, medicaid, etc.). So that brings it closer to $800-900 per person. Or another $75/month in premiums/per person.

 

[MichaelB]

Cost Sharing subsidies were extended to 7 million people in 2017. These are people at or below 250% of the federal poverty level. The subsidy amount in 2016 was $7B, which comes out to about $1000 per recipient for the year. Source - Commonwealth Fund http://www.commonwealthfund.org/publications/explainers/2017/apr/cost-sharing-reductions

For those that haven't read the link on CSR's, this subsidy covers the cost sharing parts of the policy - deductible, co-pay and co-insurance. The premium is separate.

 

[scrabbler1]

Someone in the Bogleheads forum posted a link to a chart showing the CSR loads by state, along with how each state allows the recovery of lost CSRs.


https://docs.google.com/spreadsheets/d/1W2EQhCXowRDDuqJhy6PUJtIGHjoND9f_K7oALyDAbLg/edit#gid=0

 

[MichaelB]

Here's a link many will find useful It explains the different strategies the states are following.
https://www.healthinsurancecolorado.net/state-approaches-handling-csr-uncertainty-2018-premium/

 

[pb4uski]

True, but you really can only factor in those actually signed up for ACA. Depending on your source probably 8-10 million. The rest are on different plans that are not tied to any cost factors in the ACA (medicare, employer paid, medicaid, etc.). So that brings it closer to $800-900 per person. Or another $75/month in premiums/per person.

According to this article, the total individual market was 17.6 million people, and 5.4 million were outside the exchange and 12.2 million inside the exchange. $7 billion divided by 12.2 million is $573/year or $48/month. I'm presuming that people off-exchange premiums will not increase as a result of this change. If I'm wrong then the impact is even smaller.

But one slice of the population, which includes Melquist and Goodrich, is unquestionably worse off. They are healthy people who buy their own coverage but earn too much to qualify for help paying their premiums. And the premium hikes that are being announced as enrollment looms for next year — in some states, increases topping 50 percent — will make their situations more miserable.

Exactly how big is this group? According to Mark Farrah Associates, a health care analysis firm, as of 2017, there were 17.6 million people in the individual market, 5.4 million of whom bought policies outside the health exchanges, where premium help is not available. Combine that with the percentage of people who bought insurance on the exchanges but earned too much (more than four times the federal poverty level, or about $48,000 for an individual) to get premium subsidies, and the estimate is 7.5 million, or 43 percent of the total individual market purchasers, according to insurance industry consultant Robert Laszewski.

I think it is likely that a high proportion of the $7 billion in premium increases to cover this cost will just flip back to the government in the form of higher advance premium tax credits so the net savings to the government is much less than $7 billion.

What really struck me is the spin that these payments were subsidizing insurers.... as if insurers would end up just eating the $7 billion increase... obviously some allegedlly high IQ people in DC don't have an elementary understanding of how insurance works.

 

[SecondCor521]

I'm 48 and healthy with two teenagers who utilize some health care. My ex, their mother, likes insurance in general and health insurance in particular. So for me the last two years the strategy has been pretty clear: buy a CSR-eligible Silver plan and target income at just under 200% FPL to get CSR87-level cost sharing.

I have looked on the exchange in the last few days and my subsidized premium for a CSR-eligible Silver plan closest to what I have now is about 50% higher (about $300 in 2018 vs. about $200 this year).

I can afford it but want to make sure I'm doing the most efficient thing. With this news, is anyone switching strategies? If so, what are you changing to and why?

ETA: MichaelB's link above is pretty helpful. I may stay at the Silver level or look at moving up to a Gold plan (which is cheaper than the Silver plan now. In Idaho the elimination of CSR reimbursements looks like it has resulted in about a 40% overall increase in premiums at the Silver level. Gold and Bronze plans rose more like 5-10%.)

 

[cathy63]

With this news, is anyone switching strategies? If so, what are you changing to and why?

This year was our first full year in retirement and we went with a bronze plan from the state exchange. Due to various other changes it was just too difficult to plan for what our income would be so the easiest thing was to take the lowest up-front cost offering.

My plan was always to spend some time in October projecting out our Q4 income and doing mock tax returns. Once I have that completed, I was planning to assess whether it made sense to move up to a silver plan for 2018. I'll still do that analysis, but I also have to throw in the off-exchange silver plans as a possible choice since they're now priced significantly lower in my state.

 

[rodi]

I'm seeing similar things to SecondCor521 - silver plans went up a LOT, while gold and platinum plans not so much. This is here in Southern Ca.

And the premium increases are significantly higher than the percent increases announced a few months ago. I suspect because insurers are nervous about the funding and laws changing. We saw the funding for CSR stuff changed - so insurers were justified in being nervous.

My bronze HSA HDHP HMO went up 25.5% (A lot more than the 11% the state had suggested it would go up. It will cost me $2164.44 MORE in premiums a year - and this is for a high deductible plan... so not a huge amount of coverage.

I looked at moving to a silver or gold plan but those premiums are significantly higher.

We are healthy, and do not run to the doctors when we get the sniffles. We definitely manage our care... which should make a HDHP great for us. That said - we've hit the deductible every year since I retired. 2 years ago was the year of sports injuries... Last year we were doing great till an ameloblastoma is discovered in older son's jaw. Specialist surgery later... again we hit the deductible. So far this year we're under the deductible... and I'm determined to keep it that way. I've wrapped the kids in bubble wrap so they won't have any more injuries... (Although that wouldn't have prevented the ameloblastoma tumor).

Interesting times we live in.

I wish we didn't need insurance. I wish it wasn't expensive. I wish deductibles and OOPs weren't so high. But there you go. At least we can get insurance... Poor older son - he's now officially the recipient of "pre-existing condition" with his ameloblastoma...

 

[rbmrtn]

Here's a link many will find useful It explains the different strategies the states are following.
https://www.healthinsurancecolorado.net/state-approaches-handling-csr-uncertainty-2018-premium/

So an unexpected consequence may be that other metal plans may benefit. If the silver plans premiums go up more relative to other levlels due to this, the tax credits also go up because they are calculated using the SLCSP. It could cost more than the CSR was.

 

[growing_older]

I think there is also an expected consequence. The whole idea of health insurance outside of an employer plan is becoming increasingly uncertain. Since you cannot be sure what kinds of policies will be available for the next few years, whether they will be affordable or how pre-existing conditions will be covered or priced, people on the cusp of ER are forced into OMy until the situation is clarified.

 

[BeachOrCity]

What many people forget is if an insurer offers aca plan in a state or county they have to offer it to everyone csr or not. The rules won’t let them charge more for a policy if they are csr eligible. The insurers have two choices to get back this seven billion
1. Charge every aca policy more premiums or
2. Stop offering Aca policies

The people hurt the most by this are those who need an aca policy but are over 400 percent of fpl. In essence they will have to pay the subsidy for those under 250 percent fpl.
The government will also end up paying more premium tax credits to those under 400 fpl.

I expect insurers to stop offering policies in counties that have a high proportion of policies that are csr eligible.

 

[pb4uski]

^^^^ Spot on.

 

[pb4uski]

....The whole idea of health insurance outside of an employer plan is becoming increasingly uncertain. ...

And while it would be a radical departure and broadly unpopular, a better solution might be the inverse... to prohibit employers from offering health insurance... every person has their own individual policy and the pool becomes so big that the health insurers must play and be competitive... also, it you lose your job or change jobs health insurance is a non-event.

 

[bmcgonig]

And while it would be a radical departure and broadly unpopular, a better solution might be the inverse... to prohibit employers from offering health insurance... every person has their own individual policy and the pool becomes so big that the health insurers must play and be competitive... also, it you lose your job or change jobs health insurance is a non-event.

+1000

 

[ShokWaveRider]

Anyone know how it will affect us folk below 200% of PL in Florida?

 

[Senator]

I think there is also an expected consequence. The whole idea of health insurance outside of an employer plan is becoming increasingly uncertain. Since you cannot be sure what kinds of policies will be available for the next few years, whether they will be affordable or how pre-existing conditions will be covered or priced, people on the cusp of ER are forced into OMy until the situation is clarified.

Wasn't there a proposal to allow people in 'Associations' to combine and purchase healthcare in a group plan, like an employer?

Perhaps AARP, or even being a member if this forum would qualify as an association and be able to purchase health insurance in a group plan.

 

[MichaelB]

The thread topic is elimination of the CSR. There have been multiple requests to defer discussion of other executive announcements until details regarding implementation are also announced.

 

[Pilot2013]

And while it would be a radical departure and broadly unpopular, a better solution might be the inverse... to prohibit employers from offering health insurance... every person has their own individual policy and the pool becomes so big that the health insurers must play and be competitive... also, it you lose your job or change jobs health insurance is a non-event.

My company does not offer "health insurance", they provide insurance that is self funded. Do you propose to cut off all working peoples affordable "health insurance"?

 

[Senator]

After reading several of the articles, it appears that instead of paying the CSR to insurance companies, the money will be spent on tax credits for the ACA policy purchasers.

 

[ShokWaveRider]

CSRs were what allowed me and DW to have a $0 deductible for 2016 and 2017. TOOP was $2500 each for 2016 and $2000 each for 2017. My agent says as a result of this order a deductible (TBA) will apply and TOOP will Triple. But the overall monthly payment "Should" be comparable.

 

[poorcarver]

An additional factor is that one way of controlling cost for insurance companies is to reduce the quality (and cost) of the network available. For example, for 2017, there were no academic medical establishments available in any network for individual purchasers, whether through exchange or not, in the Chicago area. The only modification for this were HMO's concentrated on two different local academic locations. Thus, for all practical considerations, academic medicine was not available, broadly. Interesting situation.

 

[ivinsfan]

CSRs were what allowed me and DW to have a $0 deductible for 2016 and 2017. TOOP was $2500 each for 2016 and $2000 each for 2017. My agent says as a result of this order a deductible (TBA) will apply and TOOP will Triple. But the overall monthly payment "Should" be comparable.

How does your agent know this, from what I'm reading the CSR's are required by law and can't be changed. The company can raise rates which will be payed by your premium tax credit but can't fiddle with the CSR's on the Sliver plans anyway.