A coalition of insurance, business and health care groups on Wednesday called on the Trump administration and Congress to make good on more than $7 billion in federal subsidies that marketplace insurers are set to receive this year under the Affordable Care Act.
The so-called “cost-sharing reductions” help low-income plan members pay out-of-pocket costs like deductibles and co-payments.
This year, about 58 percent of marketplace consumers, or 7.1 million people earning up to two-and-a-half times the federal poverty level, will receive the subsidies.
Depending on the amount, the money can reduce medical and prescription drug deductibles by more than up to $3,300 and cut annual out-of-pocket spending by nearly $5,600, or 58 percent, according to the Kaiser Family Foundation.
But the subsidies are the subject of an ongoing federal lawsuit by Republicans in the House of Representatives.
This week, the department of Health and Human Services said it hadn’t decided whether to pay for the subsidies even though 2017 marketplace premiums were based, in part, on insurers getting reimbursed for the money.
“No decisions have been made about how the administration will proceed,” said a statement from HHS spokesperson Alleigh Marré.
That’s causing unease among insurers, many of whom need the cost-sharing funds to solidify profit margins and ensure their participation in the federal marketplace next year.
"Ultimately, it's an issue of whether our plans could afford" to offer marketplace coverage next year without the subsidies, said Margaret Murray, CEO of the Association for Community Affiliated Plans. “Our plans are safety-net plans with a strong mission to serve low-income people. But without a (profit) margin or a path to a margin, ultimately the plans will not be able to stay. And those decisions will be made in the next month (or) two months."
On Wednesday, powerful groups, including the U.S. Chamber of Commerce, the American Medical Association, America’s Health Insurance Plans and the Federation of American Hospitals, warned the Trump administration and Congress that failure to provide the funding could destabilize marketplace coverage, by limiting plan participation. That could lead to higher premium rates in 2018 that could reduce coverage among middle-income people who don’t receive federal subsidies to pay for their insurance.
“Without funding of the (cost-sharing reductions) by Congress and the administration, there could be a ripple effect in the individual insurance market raising coverage costs for everyone,” said a statement by Chip Kahn, President and CEO of the Federation of American Hospitals.
An analysis last week by the Kaiser Family Foundation found that average premiums for some silver plans, plans that cover at least 70 percent of a consumer’s medical costs, would need to be 19 percent higher next year to make up for the funding shortfall if the subsidies weren't provided.
The Affordable Care Act authorized payment of the subsidies, but it didn't specifically fund them.
To avoid mandatory cuts to the federal budget, the Obama administration removed the subsidies from a list of programs that were slated for reductions and moved them to an IRS account that isn't subject to the appropriation process.
The House GOP 2014 lawsuit claimed the payments were illegal and a lower court agreed, ruling the Obama administration had no authority to authorize the payments outside the appropriation process. The administration appealed the ruling and the case is on hold in federal court in the District of Columbia.
If HHS Secretary Tom Price drops the appeal, the Trump administration would effectively cripple the individual market, leaving insurers responsible for the payments they are required by law to make.
But doing so would undermine Price's efforts to boost insurers through a series of proposed rule changes designed to stabilize the marketplace. HHS is expected to finalize those rule changes sometime this week.
“The administration certainly has tools to destroy the marketplaces,” Murray said. “But we expect that they will do the right thing and make the marketplaces more affordable and more stable.”
Murray said her 18 member plans that sell marketplace coverage are meeting with their boards of directors and asking their actuaries to provide two sets of possible rates for the 2018 coverage year: one that includes the subsidies and one that doesn’t.
Tim Jost, professor emeritus of law at Washington and Lee University School of Law in Virginia, said Congress could address the problem by funding the 2017 and 2018 subsidies in upcoming bills to fund the government which will be addressed when Congress returns from recess on April 24.
“I’m frankly, going to be surprised if they don’t do something,” Jost said. “This administration needs to get this sorted out unless it really wants to destroy the individual insurance market.”