Over the course of the last two years, both Republicans and Democrats have raised concerns about the stability of the market for consumers who obtain coverage on their own, outside of the employer system. It is clear that the withdrawal of cost-sharing subsidies provided through the Affordable Care Act would destabilize this already fragile market. Given the bipartisan commitment to ensuring stable and affordable coverage in the individual market, and in the absence of a larger consensus for health reform, we support a temporary extension of cost-sharing reduction (CSR) subsidies through 2018. In support of this extension, we are not taking a position on the legality of the prior or current Administration’s actions related to the CSR subsidies.
Extending the cost-sharing reductions is necessary to make sure that Americans continue to have access to affordable health insurance in the individual market. Currently, uncertainty regarding the future status of CSR subsidies is undermining health plans’ confidence in the individual health insurance market. The uncertainty will mean higher costs passed on to consumers. Moreover, health plans have indicated that failure to continue CSR subsidies could cause many of them to exit these marketplaces and discontinue offering individual market coverage or significantly increase premiums.
Extending the cost-sharing reductions is necessary to make sure that Americans continue to have access to affordable health insurance in the individual market.
In speaking directly to health insurer CEOs, action to address the future of CSR subsidies is needed immediately. Over the next month, actuaries at insurance companies are setting pricing for the 2018 plan year that for many begin this fall. These pricings are submitted to their state insurance departments for review and by the end of June insurers must submit to CMS applications for participation in the individual, Health Insurance Marketplaces. Over the next few months health plans are meeting with their Boards to decide on final participation in the Marketplaces and pricing. Final contracts between CMS and the health plan are to be completed by September.
CSR subsidies are available on a sliding scale for consumers with incomes between 100 percent and 250 percent of the Federal Poverty Level (FPL), although roughly half of CSR-eligible Marketplace enrollees have income below 150 percent of FPL. Approximately 58 percent of federal Health Insurance Marketplace enrollees receive CSR subsidies. These subsidies helped reduce out-of-pocket expenses by between $1,000 and $1,500 per year for most CSR-eligible enrollees in 2016, and could reduce deductibles by as much as $3,500 per year for the lowest-income enrollees in 2017.
We believe that until a more permanent, bipartisan solution is enacted to address needed changes in the Affordable Care Act, an extension of CSR subsidies in the interim through plan year 2018 would reduce uncertainty for the health insurance markets, consumers, and their families and should be secured as soon as possible.
This statement is from the BPC’s Expert Panel on the Future of Health Care: Former Senate Majority Leaders Bill Frist, M.D. (R-TN) and Tom Daschle (D-SD); former Acting Administrator CMS Andy Slavitt; former HCFA Administrator Gail Wilensky; Avik Roy, BPC senior advisor and president of the Foundation for Research on Equal Opportunity; Cindy Mann, former director, Center for Medicaid; James Capretta, resident fellow, Milton Friedman chair, AEI; Alice Rivlin, senior fellow, Center for Health Policy, Brookings Institution; Sheila Burke, BPC fellow and strategic advisor, Baker Donelson; and Chris Jennings, BPC fellow and president of Jennings Policy Strategies.