Cost-sharing reduction subsidies, or CSRs, paid to insurers in exchange for keeping out-of-pocket costs low for lower-income Affordable Care Act (ACA) exchange enrollees will end, HHS announced Thursday night, with the agency saying it couldn’t legally continue making the payments.
Calling the ACA “bad policy” and “bad law,” the statement from Acting HHS Secretary Eric Hargan and CMS Administrator Seema Verma, MPH, cited the lawsuit against the CSRs filed by House Republicans during the Obama administration. A federal judge had sided with Republicans’ argument that an appropriation from Congress was needed in order to make the payments, leaving the subsidies in limbo once the Trump administration came into power.
“After a thorough legal review…we believe that the last administration overstepped the legal boundaries drawn by our Constitution. Congress has not appropriated money for CSRs, and we will discontinue these payments immediately,” the HHS statement read.
The payments had been made on a month-to-month basis, but the uncertainty had already affected premiums on exchange plans for 2018. Several insurers made two rate requests, illustrating how much premiums would increase with and without the CSRs, with an earlier Kaiser Family Foundation analysis finding companies were tacking on an additional 3 to 10 percent due to the uncertainty. A Congressional Budget Office report said without the subsidies, premiums would rise by about 20 percent next year.
The move will actually raise, not lower, federal spending. Since insurers have reacted to uncertainty surrounding CSRs by raising premiums, the premium support subsidies which protect consumers from hikes will also go up, causing the federal government to spend an estimated $31 billion more between 2018 and 2027.
With insurers now having signed final contracts to offer coverage on the ACA exchanges for 2018, it’s unclear what impact this may have on the open enrollment period beginning in just over a month. Larry Levitt, senior vice president of the Kaiser Family Foundation, tweeted that some insurers’ contracts may have exit clauses allowing them an out if subsidies are pulled—which could potentially leave some counties without an ACA insurer.
The move drew swift condemnation from Democrats, with congressional leaders Nancy Pelosi and Chuck Schumer calling it “a spiteful act of vast, pointless sabotage.” It could lead to a new court battle, with New York Attorney General Eric Schneiderman promising to pursue legal action along with other state attorneys general.
"I will not allow President Trump to once again use New York families as political pawns in his dangerous, partisan campaign to eviscerate the Affordable Care Act at any cost,” he said in a statement.
Some Republicans also criticized the move. Rep. Ileana Ros-Lehtinen, R-Florida, said it would lead to more people in her district without insurance, going in the opposite direction of Trump’s promise for more affordable coverage.
The matter could all be settled by Congress if it appropriates funding for the CSRs. At least a one-year guarantee of the subsidies have been discussed as part of a bipartisan, short-term ACA stabilization package being discussed by Sens. Lamar Alexander, R-Tennessee and Patty Murray, D-Washington, the top Republican and Democrat on the Senate health committee.
The American Medical Association encouraged Congress to act quickly on CSR funding while criticizing the Trump administration’s decision.
“This most recent action by the Administration creates still more uncertainty in the ACA marketplace just as the abbreviated open enrollment period is about to begin, further undermining the law and threatening access to meaningful health insurance coverage for millions of Americans,” AMA President David Barbe, MD, said in a statement. “Our patients will ultimately pay the price. We urge Congress to accelerate its efforts to reinstate these payments before further damage is done."