Last night, the White House press secretary issued a statement that the Trump Administration would no longer make payments to insurers for the ACA’s cost-sharing reduction (CSR) program. The Administration based its decision on agency guidance that the subsidies were illegal and therefore they could no longer fund the program. This follows months of repeated suggestions from President Trump that the Administration would stop payments as a means to let the individual marketplaces collapse. NAHU is deeply concerned about this decision as it relates to increased uncertainty in the individual marketplace and we strongly advocate that Congress swiftly pass its market-stability legislation to fully appropriate funding for this program.

The CSRs help offset out-of-pocket expenses for silver-tiered plans purchased through the marketplaces, for households with incomes up to 250% of the federal poverty level. The subsidies are paid indirectly, as insurers reduce their costs for eligible consumers and in return receive monthly payments from the federal government to make up the difference, estimated at as much as $175 billion over 10 years. The CSR subsidies are separate from the ACA’s larger advanced premium tax credits. For more information on the CSR program, listen to our podcast episodes here and here.

The White House announced that the decision was based on guidance from the Department of Justice and HHS that “there is no appropriation for cost-sharing reduction payments to insurance companies under Obamacare” and that “the government cannot lawfully make the cost-sharing reduction payments.” The program is subject to the lawsuit House v. Price, arguing that the Obama Administration overreached its authority in funding the CSR program without congressional appropriations. In May 2016, U.S. District Court Judge Rosemary M. Collyer ruled in favor of Congress that, while the program had been properly authorized by Congress, the Obama Administration’s actions to fund the program were unconstitutional because Congress had not appropriated funding.

The Trump Administration had temporarily continued the Obama Administration’s appeal of the ruling, which allows the funds to continue to be paid as court proceedings are in process. In August, a federal court permitted Democratic state attorneys general to defend the program on the Trump Administration’s behalf, under the argument that the Trump Administration was not making a faithful defense of the program. While the Democratic AGs will be permitted to defend the lawsuit, they will not be able to unilaterally oblige the monthly payments to insurers. However, almost as soon as the White House released its statement that it would no longer fund the program, several AGs announced that they would begin the legal process to force the Administration to make the payments through an injunction, which could require the payments to be made while the lawsuit continues. The AGs would need to demonstrate that the nonpayment is directly harming their constituents and is not in the best interests of the defense of the program.

The decision to not make the October CSR payment increases the pressure for Congress to pass a market-stability bill in the coming weeks. Senate Health, Education, Labor and Pensions (HELP) Committee Chairman Lamar Alexander (R-TN) and Ranking Member Patty Murray (D-WA) have been in negotiations for a bipartisan bill to stabilize the ACA marketplaces for the 2018 plan year that would include temporary funding of the CSR program. There is a general consensus among enough Republicans and Democrats to provide at least temporary funding for the payments.

Most lawmakers on both sides agree that the lack of appropriated funding and legal challenges have led to significant uncertainty and instability in the market. While Democrats would prefer a permanent funding solution for these payments, they have said they would support a temporary measure to fund them for another two years if enough Republicans would also support that proposal for the measure to pass. However, Speaker Ryan’s statement calling CSR funding a “bailout of insurers” last month could hamper prospects by giving cover to Republicans unwilling to support a plan that could possibly be seen as an endorsement of the ACA.

Many insurers that are remaining in the marketplaces for the upcoming open enrollment period have already prepared for the possibility of CSR funding going away and raised their premiums accordingly by an additional 20% for the 2018 plan year to offset this additional expense. At this point, if any legislation is passed by both chambers and signed into law by President Trump during the 2018 plan year, it is likely that consumers would receive a rebate from their insurers, similar to the medical loss ratio rebates, rather than insurers simply reducing premiums. The most likely route for the legislation to be passed is for it to be attached to another piece of legislation, such as the reauthorization of the Children’s Health Insurance Program. Earlier today, Office of Management and Budget Director Mick Mulvaney spoke on behalf of the president, calling the CSRs “corporate welfare and bailouts for the insurance commissioners” while suggesting they were not open to enacting the bipartisan legislation, stating “I’m pretty sure what we won’t support, which is just a clean Murray-Alexander bill.”

Congressional Democrats have been putting increasing pressure on Republicans to advance a market-stability bill, arguing that the window for passing legislation is rapidly closing. Democrats are also advocating that failure to act will lead taxpayers paying the costs, as the Congressional Budget Office (CBO) released a report in August finding that not making the CSR payments would cost the federal government an additional $194 billion over 10 years, increase insurance rates by 20% and lead to more counties without any insurers participating on the marketplace. The CBO projects that the rate increases would be due to insurers compensating for the lost revenue while being statutorily obligated to provide the CSR offsets for eligible enrollees. The increased premiums would then lead the federal government to pay more in advanced premium tax credit subsidies (APTCs), which would result in the net increase in cost to the federal government.

NAHU is strongly advocating for the CSRs to be funded in the Alexander-Murray market-stability bill and for Congress to swiftly pass this legislation. The legal challenges surrounding these payments are unlikely to be resolved in the near term. In the meantime, consumers will face an increasingly instable marketplace with steadily increasing costs. Congress is in the position to prevent further harm to consumers and avoid the ongoing uncertainty by fully appropriating funding for the program.