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Kaiser: Trump's CSR stunt would cost taxpayers $2.3 billion/yr MORE than just making the damned payments

A couple of weeks back, the Kaiser Family Foundation crunched the numbers to see just how much insurance carriers would likely raise their full-price premiums on individual market policies to make up for lost CSR assistance reimbursements in the event that Donald Trump makes good on his threat to discontinue them. Their conclusion?

A new Kaiser Family Foundation analysis finds that the average premium for a benchmark silver plan in Affordable Care Act (ACA) marketplaces would need to increase by an estimated 19 percent for insurers to compensate for lost funding if they don’t receive federal payment for ACA cost-sharing subsidies.

Again, that's an average onf 19% on top of whatever the carriers would otherwise be increasing rates for other reasons.

This has been confirmed by a separate report from the American Academy of Actuaries, which draws the same conclusion:

For actuaries to assess premium requirements, they urgently need to know whether those reimbursements will be funded. Decisions to not pay the reimbursements or even uncertainty about the reimbursements could result in 2018 premiums increases averaging nearly 20 percent for silver plans, over and above premium increases due to medical inflation and other factors. The continued uncertainty or prospect of higher premium increases could cause more insurers to withdraw from the market, potentially leaving more areas of the country with one or even no participating insurers.

Funding of the CSR reimbursements through congressional appropriations or other means is needed as soon as possible to avoid these premium increases or potential further market withdrawals.

How much money are we talking about here? Well, according to the Congressional Budget Office (CBO), it's expected to total around $7 billion this year, but to jump to around $10 billion in 2018.

So...killing off CSR would cause a 19-20% rate hike for the enrollees, which sucks for them, but would also save taxpayers at large $10 billion per year, right? Hooray for silver linings!

Well...no. HALF the individual market would indeed be stuck with a 20% additional rate hike...but the other half, roughly 9 million people, would simply see their APTC assistance increase accordingly. And due to the way the exchange policies are priced and the subsidies are calculated, guess what would actually happen?

Many insurers might react to the end of subsidy payments by exiting the ACA marketplaces. If insurers choose to remain in the marketplaces, they would need to raise premiums to offset the loss of the payments.

...There would be a significant amount of uncertainty for insurers in setting premiums to offset the cost of cost-sharing reductions. For example, they would need to anticipate what share of enrollees in silver plans would be receiving reduced cost-sharing and at what level. Under a worst case scenario – where only people eligible for sharing reductions enrolled in silver plans – the required premium increase would be higher than 19%, and many insurers might request bigger rate hikes.

...While the federal government would save money by not making CSR payments, it would face increased costs for tax credits that subsidize premiums for marketplace enrollees with incomes 100-400% of the poverty level.

...Any systematic increase in premiums for silver marketplace plans (including the benchmark plan) would increase the size of premium tax credits. The increased tax credits would completely cover the increased premium for subsidized enrollees covered through the benchmark plan and cushion the effect for enrollees signed up for more expensive silver plans. Enrollees who apply their tax credits to other tiers of plans (i.e., bronze, gold, and platinum) would also receive increased premium tax credits even though they do not qualify for reduced cost-sharing and the underlying premiums in their plans might not increase at all.

In other words, since APTC tax credits, once determined, can be utilized for any exchange policy whether it qualifies for CSR assistance or not, the total increase in APTC payments by the federal government would be higher than the amount saved by not making the CSR payments in the first place.

We estimate that the increased cost to the federal government of higher premium tax credits would actually be 23% more than the savings from eliminating cost-sharing reduction payments. For fiscal year 2018, that would result in a net increase in federal costs of $2.3 billion. Extrapolating to the 10-year budget window (2018-2027) using CBO’s projection of CSR payments, the federal government would end up spending $31 billion more if the payments end.

They make sure to include one really, really important caveat:

This assumes that insurers would be willing to stay in the market if CSR payments are eliminated.

Yep. If CSR payments are pulled, the results would be:

ASSUMING enough carriers stick around that enrollment on and/or off the exchange doesn't drop significantly...

  • Subsidized enrollees wouldn't see much of a change at all.
  • Unsubsidized enrollees (on or off exchange) would see an extra 19% rate increase.
  • The federal government would have to shell out $2.3 billion more than they otherwise would have to next year alone (and $31 billion more over the next decade)

ASSUMING enough carriers bail to cause significant drop-off in enrollment...

  • Subsidized enrollees would be screwed without any exchange options.
  • Unsubsidized enrollees would have about a 50/50 chance of being screwed depending on what off-exchange only options were still around.
  • The federal government would indeed save money...but only because millions fewer people would be insured.