A week before the 2018 open enrollment period began, a federal judge rejected an emergency motion filed by a coalition of Democratic state attorneys general – including four New England states – to stop the Trump Administration from ending cost-sharing subsidies to insurers required by the Affordable Care Act (ACA).
Insurance regulators in many states had already made contingency plans to raise 2018 premium rates in case the cost-sharing reduction (CSR) payments to insurance companies ended by the Nov. 1 start of open enrollment. And increases in rates for silver exchange plans will end up being covered by an increase in tax credits for 2018, provided change is not made in current tax law.
Even so, California Attorney General Xavier Becerra has vowed to fight to reinstate the CSR subsidies. He filed the lawsuit Oct. 13 on behalf of other attorneys general from 18 states and the District of Columbia, including Connecticut, Massachusetts, Rhode Island and Vermont.
On Oct. 25, U.S. District Court Judge Vince Chhabria for the Northern District of California denied an emergency motion sought by Becerra to compel the U.S. Department of Health and Human Services to continue the CSR payments to insurance companies.
The legal problem in the case: The ACA requires insurance companies to be paid, but there are conflicting interpretations over whether the law actually appropriates money for this mandate.
The Constitution prohibits the executive branch from spending money on a program if Congress does not appropriate money for it. The Obama Administration had concluded the ACA appropriated money for CSR payments and drew funds from the U.S. Treasury each month to make them.
The Trump Administration continued the practice until Attorney General Jeff Sessions sent an Oct. 11 letter to the Treasury Department and the Department of Health and Human Services stating his view that the ACA made no permanent appropriation for CSR payments.
CSR payments offset the costs of providing reduced copayments, deductibles and coinsurance on silver level – or moderate premium – plans for people with incomes up to 250 percent of the federal poverty level, or an individual earning up to $29,700.
In 2016, the federal government spent $7 billion on CSR payments to insurance companies, which helped 7 million people pay for doctor’s visits, medications and other treatment.
After the decision by Chhabria, an Obama appointee, Becerra said the coalition will press for a permanent resolution to require the Trump Administration to resume making the payments in
compliance with the law.
Chhabria had set a telephone case management conference for Nov. 21 “for the purpose of setting a schedule for the full adjudication of the case.”
Other states joining the lawsuit are Delaware, Kentucky, Illinois, Iowa, Maryland, Minnesota, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Virginia, and Washington.
“Certainly, we are disappointed in the decision,” said Rhode Island Attorney General Peter Kilmartin in an emailed statement.
“While we are in continuous discussions with the group of plaintiff attorneys general on the next steps in the lawsuit, it is more critical than ever that Congress act quickly on bipartisan legislation to authorize the subsidies that will provide relief to insured Americans and add predictability and stability to insurance rates.”
Every New England state except Vermont had allowed insurers to adjust their 2018 rates to account for the termination of CSR payments.
In August, the Rhode Island Office of Health Insurance Commissioners (OHIC) approved rates for two carriers offering plans on the state’s exchange called HealthSource RI: The rates reflected a 12.1 percent increase on average across all plans for Blue Cross & Blue Shield of Rhode Island and a five percent increase across all plans for Neighborhood Health Plan of Rhode Island.
OHIC requested the two insurers submit a secondary filing anticipating that CSR payments would end. Adjusted rates approved on Oct. 24 showed the increases across all plans at 13.5 percent for Neighborhood Health Plan and 20.3 percent for Blue Cross & Blue Shield.
“Some of these specific plan level rate increases are quite high,” said Cory King, principal policy associate at the Rhode Island OHIC. “There’s a Blue Cross silver plan that went up 43 percent. There’s another silver plan that went up 20. It depends on the network configuration, all these other factors. The average is just the average. There’s variation under that and all of this is before any age adjustments obviously.”
The Massachusetts health care exchange, known as the Connector, had estimated that CSR payments for 2018 would total $146 million. Uncertainty surrounding the funding led to two sets of rates filed for ConnectorCare plans. Initial rates approved Oct. 12 increased 8 percent. A week later, on Oct. 19, rates were adjusted to show an 18 percent increase on silver tier plans, Director of Communications Jason Lefferts said via email.
Massachusetts had applied to the Centers for Medicare and Medicaid Services (CMS) for a waiver under Section 1332 of the ACA to waive CSR payments and redirect the federal money to a state-administered premium stabilization fund that would make equivalent payments to insurers. CMS denied the request Oct. 23 on the basis that there was insufficient time before the 2018 open enrollment period to allow for a public comment period.
The Connecticut Insurance Department asked for supplemental rate filings from its two exchange carriers assuming no CSR payments and adjusted approved rate increases for silver plans offered on Access Health CT. As a result, Anthem’s 24.7 percent increase rose to 31.7 percent and ConnectiCare Benefits, Inc.’s rate hike went from 16.8 percent to 27.7 percent.
The state of Vermont, however, prevented insurers from adjusting rates. The Green Mountain Care Board approved a 9.2 percent average annual rate increase for Blue Cross Blue Shield Vermont and a 3.5 percent increase for MVP, the two carriers offering plans on Vermont Health Connect. But the decisions were made with the assumption that CSR payments would be fully funded.
Vermont’s insurance pool for exchange participants is merged with that for small business employees. So, the board decided against adjusting rates to reflect the loss of CSR funds because it would hurt small businesses, said Judy Henkin, the board’s general counsel. That leaves the carriers forced to dip into their reserve funds to absorb the loss, she added.
“We made the decision that this is something that the carriers would have to shoulder this year,” Henkin said. “Next year, if nothing happens it’s going to be a serious rate shock.”
Insurers in New Hampshire and Maine, where consumers purchase health insurance through the federal marketplace, also filed rates that anticipated CSR payments ending. But Anthem Blue Cross and Blue Shield pulled out of Maine’s ACA health care marketplace in September in part because of uncertainty over the future of the cost-sharing reduction program.
That leaves Maine with only Community Health Options and Harvard Pilgrim Health Care offering plans in which cost-sharing and subsidies can be used to help pay premiums.
How consumers will be affected by premium increases will depend in part on whether they qualify for tax credits, which increase dollar for dollar along with benchmark silver premiums.
A Kaiser Family Foundation analysis concluded that while the federal government would save money by not making CSR payments, there would be a net spending increase of $2.3 billion for tax credits that subsidize premiums for enrollees with incomes up to 400 percent of the poverty level. Approximately 84 percent of enrollees receive tax credit subsidies.
The Congressional Budget Office estimated that ending the CSR payments will cost federal taxpayers an extra $194 billion from 2017 through 2026.
The American Psychological Association has joined other associations of health professionals in opposing Trump’s move to halt CSR payments. APA President Antonio E. Puente, Ph.D. said the action could put working families and individuals who do not qualify for Medicaid and do not have access to employer-sponsored health plans at risk.
“Insurers are likely to leave the ACA’s markets or reduce plan offerings, leaving millions of Americans with no coverage, or with inferior short-term plans that do not offer critically needed coverage for pre-existing conditions,” Puente said in a statement. “APA calls on Congress to act swiftly to pass legislation to continue the subsidies and not allow the Affordable Care Act to be dismantled piece by piece.”