CSRs

CSR

 

Back in March, I wrote up an exhaustive history of the House v. Burwell court case, which has seen more twists and turns than a small intestine.

I'm not gonna recap the whole thing yet again today (click the first link above for that), but I concluded the most recent chapter by noting:

Simply appropriating CSR payments and killing off Silver Loading would pay for more than 40% of the cost of massively upgrading the ACA (perhaps $250 billion of the $600 billion or so total 10-yr cost).

Gold/Silver

I've written in-depth explainers before of how Silver Loading came into existence and how it works as part of longer blog posts, but I also wanted to have a simpler, standalone version, so here it is.

First, a quick backstory:

CSR

 

I honestly thought that I had written the final chapter in this absurd saga, which started two administrations, two House Speakers, three HHS Secretaries and three U.S. Attorney Generals ago when the Federal Circuit Court issued their final ruling last August, but apparently not.

Since this insanity has been grinding away for nearly seven years now, I'm pretty much just reposting my entire August entry, with an important update tacked on at the end.

Here's a quick recap:

  • The ACA includes two types of financial subsidies for individual market enrollees through the ACA exchanges (HealthCare.Gov, CoveredCA.com, etc). One program is called Advance Premium Tax Credits (APTC), which reduces monthly premiums for low- and moderate-income. APTCs are the subsidies which have been substantially beefed up by the American Rescue Plan (the additional subsidies will be available starting in April in most states, soon thereafter in most other states).
  • The other type of subsidies are called Cost Sharing Reductions (CSR), which reduce deductibles, co-pays and other out-of-pocket expenses for low-income enrollees.
  • In 2014, then-Speaker of the House John Boehner filed a lawsuit on behalf of Congressional Republicans against the Obama Administration. They had several beefs with the ACA (shocker!), including a claim that the CSR payments were unconstitutional because they weren't explicitly appropriated by Congress in the text of the Affordable Care Act (even though the program itself was described in detail, including the payment mechanism/etc.)

Welcome to the latest chapter in the long, epic CSR Lawsuit Saga which has been slogging along for six years now.

Here's a quick recap (again):

  • The ACA includes two types of financial subsidies for individual market enrollees through the ACA exchanges (HealthCare.Gov, CoveredCA.com, etc). One program is called Advance Premium Tax Credits (APTC), which reduces monthly premiums for low- and moderate-income. The other is called Cost Sharing Reductions (CSR), which reduces deductibles, co-pays and other out-of-pocket expenses for low-income enrollees.
  • In 2014, then-Speaker of the House John Boehner filed a lawsuit on behalf of Congressional Republicans against the Obama Administration. They had several beefs with the ACA (shocker!), including a claim that the CSR payments were unconstitutional because they weren't explicitly appropriated by Congress in the text of the Affordable Care Act (even though the program itself was described in detail, including the payment mechanism/etc.)

NOTE: This is a joint post by three of my colleagues and myself:
David M. Anderson, Charles Gaba, Louise Norris and Andrew Sprung

State policymakers have been prolific and creative in putting forward measures to strengthen their ACA marketplaces. Measures enacted since 2017 or in progress now include reinsurance programs, which reduced base premiums by an average of 20% in their first year in the first seven states to implement such programs; new or renewed state-based exchanges, which capture insurance user fees that can be used for advertising and outreach; state premium subsidies to supplement federal subsidies; and state-based individual mandates, which can provide funding for all of the above.

I talked about this the other day, but re-reading my post, I don't think I emphasized it nearly enough:

It's also important to keep in mind that due to how the ACA's subsidy formula is structured (combined with Silver Loading and Silver Switching), a lower benchmark premium will actually result in higher net premiums for many subsidized enrollees (although it's still good news for those who are unsubsidized). Here's why:

  • Let's say the unsubsidized premiums for a given enrollee in 2019 is $400 for Bronze, $600 for the benchmark Silver and $700 for Gold.
  • Let's say that enrollee earns exactly $32K/year (256% FPL), meaning they only have to pay 8.54% of their income for the benchmark plan.
  • That means they qualify for ($7,200 - $2,733) = $4,467 in subsidies ($372/month).

This would leave them paying $228/month for the benchmark Silver...but they can apply that towards a Bronze plan if they wish so they'd only pay $28/month, or a Gold plan so they only pay $328/month.

OK, I know, I know, I'm obsessing over this and I promise to stop soon.

Yesterday I noted that due to a surreal, Rube Goldberg-esque series of events dating back to a different lawsuit filed back in 2014 by then-Speaker of the House John Boehner (!), it's looking very likely that the federal government will have to shell out at least $1.6 billion in Cost Sharing Reduction (CSR) reimbursement payments to over 100 health insurance carriers even though those carriers have already made up most of their losses elsewhere in the form of increased premium rates.

Back in February, I issued a strong warning to House Democrats to proceed with caution when it comes to the prospect of agreeing to reinstate the Cost Sharing Reduction (CSR) reimbursement payments which Donald Trump cut off back in October 2017:

  • Had CSR reimbursement payments continued to be paid over the next decade, the CBO projected that it would have cost the federal government $118 billion between 2018 - 2026, or around $13 billion per year on average.
  • Cutting off CSR reimbursement payments saves the federal government that $118 billion over 9 years. HOWEVER...

 

The CSR Lawsuit Saga has been a continuous rollercoaster ride since 2014 at this point, with the original lawsuit (brought by John friggin' Boehner) seeing twists including one of the plaintiffs becoming one of the named defendents, and the named defendent changing at least three times as the Trump Administration went through several HHS Secretaries over the course of a few months.

The extremely short version, again: Donald Trump attempted to sabotage the ACA exchanges by pulling the plug on Cost Sharing Reduction reimbursement payments...but in doing so, unintentionally ended up:

  • NOT hurting the very people he was trying to hurt (low-income enrollees);
  • HURTING the very people he supposedly wasn't trying to hurt (middle-income enrollees), and as an added bonus...
  • INCREASING federal spending by a projected $20 billion dollars per year in increased premium subsidies

Nearly 100 insurance carriers who were stiffed by Trump out of a couple billion dollars owed to them for 2017 sued the federal government, and the judges in the cases ruled in their favor, ordering the feds to pay up. This much was completely expected and not at all out of the ordinary.

 

Over at Inside Health Policy (paywall), Amy Lotven has an update regarding the eyebrow-raising decisions a few weeks ago by federal judges in several of the Cost Sharing Reduction (CSR) reimbursement payment lawsuits.

The general thinking at the time was that the judges would simply rule in the carriers favor and order the Trump Administration to pay the carriers the money owed to them from the last three months of 2017 (over $2 billion nationally, although the amounts at stake for each individual carrier suing is generally kmore along the lines of seven figures each). If this had been what happened there likely wouldn't have been much more to the story.

Instead, all three judges ruled--on behalf of dozens of carriers, since at least one of the cases is a class action suit--that the government owes them CSR payments for not only Q4 2017, but all twelve months of 2018 as well, assuming the carriers wanted to demand those payments.

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