"Lord knows you just don't mess around with CSR."


48 hours ago I posted this analysis/explainer of the "Silver Switcharoo", the goofy, bass-ackwards workaround which insurance carriers and state regulators could (if necessary) use to resolve Donald Trump's impending threat to pull the plug on Cost Sharing Reduction subsidy reimbursement payments.

There's been a whole bunch of additional CSR-related developments since then:

Congressional Republicans have finally started to come around and realize they need to formally appropriate the payments:

Congressional Republicans moved on Tuesday to defuse President Trump’s threat to cut off critical payments to health insurance companies, maneuvering around the president toward bipartisan legislation to shore up insurance markets under the Affordable Care Act.

Senator Lamar Alexander of Tennessee, the influential chairman of the Senate Health, Education, Labor and Pensions Committee, announced that his panel would begin work in early September on legislation to “stabilize and strengthen the individual health insurance market” for 2018. He publicly urged Mr. Trump to continue making payments to health insurance companies to reimburse them for reducing the out-of-pocket medical expenses of low-income people.

In the House, two Republicans, Representatives Tom Reed of New York and Charlie Dent of Pennsylvania, teamed with Democrats to promote incremental health legislation that would also fund the cost-sharing subsidies.

Covered California formally stated that they'll use the Silver Switcharoo gambit if CSRs are pulled as part of their official rate filing announcement:

Covered California instructed health insurance companies to submit their rates assuming direct payment to fund the CSR subsidies would be continued, but to also submit a separate CSR surcharge to “load” any costs to fund this program onto Silver-tier plans for those who receive subsidies. As a result, Silver-tier consumers may see an additional “CSR surcharge” that averages 12.4 percent — ranging from 8 percent to 27 percent on the gross price of their premiums — if there is no commitment from the administration to fund these payments through 2018. However, while the gross or total premium for consumers receiving subsidies would reflect this CSR surcharge, in most cases, consumers would not see a “net” change in what they would pay since the premium tax credit would also increase.

“This action allows Covered California to keep the market stable and protect consumers from this uncertainty,” Lee said. “While most Silver-tier consumers will not see the full impact of the ‘CSR surcharge,’ and every consumer could avoid paying any additional premium by shopping, we hope that we do not need to implement this work-around that would cause unnecessary confusion and ultimately cost the federal government more than it would to continue to make the payments directly.

At around 4:00pm yesterday afternoon, former Centers for Medicare & Medicaid director Andy Slavitt made the call...

NEWS: I have solid word that Trump won't pay CSRs if Senate doesn't vote again to repeal. He will announce this week.

— Andy Slavitt (@ASlavitt) August 1, 2017

...but then, a few hours later...

D.C. Circuit Court announced that they're allowing 15 state Attorneys General to jump onboard the House v. Price appeal:

That’s a big deal. If the Trump administration wanted to stop making cost-sharing payments, the easiest way to do so would be to dismiss the appeal. The lower court entered an injunction to stop those payments, but put its injunction on hold to allow for an appeal. If Trump were to order the appeal’s dismissal, the injunction would spring into force, and the payments would end.

Now the states can keep the appeal alive, even if Trump wants to get rid of it.

Unfortunately, this isn't an absolute guarantee by any means. Not only does Trump break the law and ignore the courts whenever he feels like it anyway, there's also some other factors: The Congressional hearings called for by Sen. Alexander don't start until September, while the final 2018 rate filings are due on August 16th. Furthermore, he might still be able to go ahead and kill them off legally anyway; as Bagley goes on to caution:

Now, the Trump administration could probably stop the payments, with or without the pending appeal. The administration could simply announce that, after a thorough review, the Justice Department has concluded that no appropriation exists to continue making the payments. Although there’s a regulation on the books requiring payments to be made, the absence of an appropriation would likely prevent the administration from following through.

There might be an injunction or reversal or whatever over the following months, but in the meantime much of the damage will have been done.

This morning, David Anderson of Balloon Juice suggested that the CSR mess might even turn into a year-to-year thing, following in the footsteps of the infamous Sustainable Growth Rate (SGR) conundrum of yesteryear, otherwise known as the "Doc Fix" (this was eventually resolved permanently a couple years back):

The Sustainable Growth Rate (SGR) was a Medicare payment formula that attempted to reduce the amount doctors and hospitals got paid. Every couple of years, Congress would pass a “Doc Fix” that pushed the cuts back.

...Getting into an equilibrium where CSR is appropriated/authorized every year but carriers can credibly claim that they can’t count on it until after rate filing season could be a backwards way of significantly upping the effective subsidy and the effective actuarial value without harming the off-exchange buyers.

Anderson argues that this could even be a net positive in the long run (if a very messy one). He's not really endorsing it so much as taking a "lemonade out of lemons" attitude.

I'd agree with him except for one other important factor which I forgot to mention in my "Silver Switcharoo" explainer the other day: The impact of killing CSR payments on the Basic Health Programs (BHP) in New York and Minnesota.

As Bill Hammond of the Empire Center explains:

As happens so often in health policy, New York has more to lose than almost any other state.

In the rest of the country, it’s insurance companies that stand to forfeit money if Trump follows through on his threat. In New York, state government would take most of the hit.

The end of the cost-sharing subsidies would open an almost $1 billion hole in the budget of the state-operated Essential Plan, an optional benefit under Obamacare that was exercised only by New York and Minnesota.

The Cuomo administration would face a choice between backfilling the lost federal funds with state dollars or shutting down a fast-growing health plan that covers 665,000 low-income New Yorkers.

In another wrinkle, New York–because of its unusual structure–also stands to be denied a counterbalancing increase in federal premium tax credits that would soften the blow for low-income consumers in other states.

Here's the short version:

  • BHP (called "Essential Plan" in NY and "MinnesotaCare" in MN) plans are available to U.S. citizens earning between 138 - 200% of the Federal Poverty Line, as well as certain classes of documented immigrants.
  • Around 665,000 New Yorkers are enrolled in BHP plans, along with around 100,000 Minnesotans.
  • BHP funding is based on APTC (premum tax credits) + CSR (cost sharing reduction) funding.
  • The actual formula is to add up the APTC + CSR which the enrollees would otherwise be eligible for, then knock 5% off the total (i.e., 95% of APTC+CSR).
  • In New York, at least, this amounts to around $5,600 per enrollee per year...about 1/4 of which comes from CSR funds.

Cut off CSR funding and you cut off 25% of BHP funding (the ratio is likely somewhat different in Minnesota, but I'm assuming CSR funding still makes up a significant chunk of the total).

Ah, but this would be cancelled out by the increase in APTC funding, right? Well, partially...but as Hammond goes on to explain:

In New York, by contrast, most consumers who qualify for cost-sharing are enrolled in the Essential Plan, so the end of the program would have relatively little effect on commercial premiums. Based on recent filings by health plans, the Department of Financial Services has estimated that the loss of cost-sharing would increase premiums by an average of just 1.3 percent.

I actually mentioned this in my NY rate hike write-up back in June, but had since forgotten about it. The bottom line is that unlike most states, APTC funding would only go up slightly in New York in a "Silver Switcharoo" scenario because so many NY residents who would otherwise be enrolled in ACA exchange plans are enrolled in BHP plans instead,

In addition, while I'm pretty sure the vast majority of Minnesota BHP enrollees are U.S. citizens, the situation in New York is a bit different:

The Cuomo administration launched the Essential Plan, in part, to save money on health coverage for legally present immigrants. The residents in question are entitled to Medicaid coverage under state court rulings, but ineligible for federal Medicaid funding (mostly because they have been in the country less than five years). By shifting some 250,000 such immigrants out of Medicaid (where the state paid 100 percent of the cost) into the Essential Plan (which is 90 percent federally funded), the state has realized a net savings of about $850 million.

In short: Switching from Medicaid to BHP saved New York $850 million per year...but losing the CSR portion of BHP funding would cost the state $935 million per year.

Bottom Line: Congress still needs to formally appropriate the damned CSR payments, pronto.

UPDATE: OK, even as I'm typing this, there's some discussion on Twitter among folks like David Anderson, Michael Kalina and Hannah Recht (all of whom I recommend following) as to whether BHP funding is based on 95% of what APTC+CSR payments actually are or how much they're supposed to be. If the first is accurate, then this is a real problem. If the second is accurate, then not only is BHP funding not at risk, but it should even see a slight increase based on the 1.3% APTC hike. Stay tuned...