White House reverses $10B in cuts to ACA cost-sharing subsidies

The White House has decided to reverse roughly $10 billion in cuts to the cost-sharing subsidies that were part of the Patient Protection and Affordable Care Act. That program was originally expected to be slashed by 7.3 % in fiscal 2015 and beyond as part of the sequester cuts.

But in a report released this week by the Office of Management and Budget—and first flagged by the Committee for a Responsible Federal Budget—the Obama administration didn't include the cost-sharing subsidies among the programs that will be subject to the sequester cuts. That's a reversal from the previous year.

The cost-sharing subsidies get less attention than the tax credits, which are available to individuals making up to 400% of the federal poverty level to purchase plans through the state and federal exchanges. The subsidies are intended to help low-income individuals cover co-payments, deductibles and other out-of-pocket costs. They are available to individuals with incomes up to 250% of the federal poverty level who purchase plans that are designed to cover at least 70% of their medical costs.

It wasn't immediately clear what caused the administration to reverse course on the cost-sharing subsidies. But the Committee for a Responsible Federal Budget, a nonpartisan fiscal watchdog group, suggested that it could be related to the fact that cost-sharing subsidies for low-income people who are part of the Medicare prescription drug program are explicitly exempted from sequester cuts.

Other pieces of the ACA will still be subject to 7.3% cuts under the sequestration agreement. Grants to states establishing their own exchanges will be reduced by $61 million in fiscal 2015, while the risk adjustment and re-insurance programs—which are designed to protect insurance companies from undue financial risk—will be reduced by nearly $1 billion.

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