Silver-loading complicates CSR lawsuits

Insurers are so far undefeated in a string of lawsuits to recover billions in unpaid cost-sharing reduction payments cut off by President Donald Trump in 2017, following two federal court decisions late last week.

But with a winding legal path ahead and a policy mess no matter the outcome, it's unclear whether any involved party—the government, the insurers or the people who pay full freight on the exchanges—will win.

At immediate issue is whether these accumulating insurer victories will tamp down on silver-loading, a practice widespread across nearly all states since Trump halted cost-sharing reduction payments, or CSRs. Silver-loading, what happens when exchange insurers pile the costs into the silver benchmark plans and pass them on to unsubsidized silver plan enrollees and the federal government, has proven extremely expensive for the government.

Sabrina Corlette of Georgetown University's Center on Health Insurance Reforms said this question is mostly a function of timing. Will the courts or the federal government finally resolve or settle the multiple lawsuits around CSRs before insurers have to finalize their rates for 2020?

Yet she also noted that while plans mostly assume the status quo of the law when they set rates, the potential financial and logistical implications are so significant they can't be overlooked when it comes to planning.

"State insurance departments will have to think about this and ask: 'What do we do? Do we allow silver-loading for 2020?' " Corlette said. "There's all kinds of questions you'd have to ask if you do silver-loading."

Katie Keith, an expert on the Affordable Care Act, questioned in a Health Affairs blog post whether the ruling will lead to an HHS crackdown on silver-loading. "These rulings could give HHS an additional reason to prohibit the practice of silver loading by suggesting that insurers could unfairly silver load and recover for unpaid CSRs at the same time," Keith wrote.

Last month, HHS in a proposed rule suggested it could end the practice for 2021 and asked states and other interested parties to weigh in.

A spokesperson for the National Association of Insurance Commissioners did not respond by deadline to a query from Modern Healthcare on how state insurance regulators view the litigation in light of upcoming rate filings.

But the Rhode Island and Colorado insurance departments told Modern Healthcare that they were planning on moving ahead with silver-loading for 2020.

Both departments also submitted their public comments on the proposed payment rule on Tuesday. Colorado has asked HHS not to restrict silver-loading at all, according to Assistant Commissioner Vincent Plymell.

Meanwhile, no one knows when states, federal officials and insurers will have to hammer out the logistics of a resolution.

The Justice Department declined to comment on whether it would appeal last week's decisions, but the government has already appealed the first court ruling from September on a parallel lawsuit.

Until then, state insurance commissioners and plans aren't likely to get certainty or guidance from Congress, where last year lawmakers couldn't agree to a deal to appropriate the CSRs. Their failure was technically due to a dispute about attaching language known as the Hyde Amendment, to block any federal funds from paying for abortions.

That stalemate is still in place. GOP and Democratic aides confirmed it's unlikely lawmakers will try again on CSRs any time soon.

"The only way Congress could pass an appropriation for CSRs is if Democrats reverse course and agree to apply the Hyde Amendment which applies to all other healthcare appropriations," a Republican aide from the Senate health committee said.

But as states forge ahead with silver-loading, policy experts and legal analysts are trying to grapple with how a government repayment of CSRs would technically work, given silver-loading and the ACA's cap on insurer profits known as the medical loss ratio, or MLR.

"Because of silver loading, do repaid CSRs for 2018 get wrapped up in MLR rebates for consumers?" Keith said. "I think there's some practical considerations that I'm not sure we understand just yet regarding whether this would be a windfall for insurers."

Michael Adelberg, a former CMS official and consultant at the law firm Faegre Baker Daniels, agreed, and added that if the courts keep siding with insurers they will have to settle on the scope of their decision: do insurers get payments only for 2017, before they staved off losses through silver-loading, or for 2018 and thereafter as well? How would it look state-by-state?

"Silver-loading is a nice convenient term, but different states gave different instructions to the insurers," Adelberg said. "There are subtleties there that would have to get figured out."

Nicholas Bagley, ACA expert and law professor at the University of Michigan, outlined in a post for the Incidental Economist just how complicated the case can get as it continues through the courts.

Ultimately, he concluded, the potential outcomes are so messy that the problem urges congressional action.

"Congress could and should stop the bleeding: there's no reason at all to funnel money to insurers that have adjusted to a world without cost-sharing payments," Bagley wrote. "But there's a big gap between what Congress should do—and what it will do."