Ending cost-sharing reduction payments could cause insurers to abandon the individual market in counties that contain 5% of the U.S. population, according to a new projection from the Congressional Budget Office. Additionally, gross premiums for silver plans offered through the Affordable Care Act marketplace would jump 20% in 2018 and by 2020 would be 25% higher than if the CSRs continue.
The CBO Tuesday said that if the CSR payments were cut off after insurers had already committed to 2018 rates, more insurers would exit the market in order to stem their losses.
The Affordable Care Act requires that insurers offer low deductibles and lower out-of-pocket limits to the lowest income customers. However, the premiums that they and the government pay together are the same as others in the silver tier, so those premiums do not pay for the more generous benefits.
President Donald Trump has repeatedly threatened to stop paying CSRs, calling them a bailout for insurers.
Congress has never appropriated the billions of dollars to fund the CSR payments and the House of Representatives sued the Obama administration for sending the money to insurers, saying it is unconstitutional. A federal judge agreed, and an appeal has been in limbo since Trump took office.
Sen. Lamar Alexander (R-Tenn.) and Sen. Patty Murray (D-Wash.) are working on a bipartisan bill that will appropriate the funds. It is not clear whether the House would cooperate with that approach.
The CBO suggested that insurers would potentially return to markets in 2020 after getting a better sense of the competitive landscape. "So people in almost all areas would be able to buy nongroup insurance (as is projected to be the case throughout the next decade under CBO's baseline projection)," CBO reported.
Even though the government is expected to spend $7 billion on CSRs in 2017 and $10 billion in 2018, the 20% rise in silver plan premiums in 2018 that would result from terminating the CSRs would more than offset the end of CSR payments. CBO projects that deficits would be $6 billion higher without CSRs in 2018, $21 billion in 2020 and $26 billion in 2026.
The agency expected most states would allow insurers to concentrate premium increases in silver plans, not bronze or gold, so almost all people who do not qualify for subsidies would avoid silver plans.
More people would qualify for subsidies, and the average amount of subsidy per person would climb.