Confused about why the threat last year to terminate ACA cost-sharing payments (known as CSRs) was seen as potentially destabilizing, while now funding those subsidies isn’t stabilizing? I’ll try to explain.
When the president threatened on several occasions last year to terminate CSR payments, it was seen as a potential signal of a broader strategy to undermine the ACA marketplace.
There was also concern last year among insurers that the individual mandate wouldn’t be enforced. As it turns it, the mandate penalty was repealed entirely in the tax bill, so the concerns were not unwarranted.
All of the uncertainty last year surrounding the ACA, including potential termination of CSR payments, led some insurers to exit the individual market and others to increase premiums.
Many analysts (including us, last April) suggested that the optimal response to the termination of CSR payments would be to increase just silver premiums in the marketplace.
kff.org/health-reform/…
kff.org/health-reform/…
Increasing just silver marketplace premiums to offset the loss of CSR payments made sense, since cost-sharing reductions are only available in silver plans. However, it wasn’t clear that federal or state regulators would permit that.
As it turns out, most states directed insurers to increase silver premiums to offset the loss of CSR payments. This had the effect of boosting premium subsidies for lower-income ACA marketplace enrollees and holding other enrollees mostly harmless.
kff.org/health-reform/…
kff.org/health-reform/…
The effect of increasing silver premiums to offset the loss of CSR payments was that ACA premium subsidies went up. Subsidized consumers enrolling in silver plans were held harmless, but those in bronze and gold plans saw their premiums actually decrease.
kff.org/health-reform/…
kff.org/health-reform/…
If CSR payments are now funded, the result would be that many lower-income ACA marketplace enrollees would pay higher premiums. This is certainly confusing, but true.
There are still some arguments for funding CSRs. It would lower federal spending. And, it would create greater long-term certainty for insurers. (For example, the federal government might in the future prohibit so-called silver loading.)
If an ACA stabilization package funded CSRs and created a new reinsurance program, the net effect would be to increase premiums for low-income people and decrease premiums for middle and higher income individual market enrollees.
