A One-Two Punch to the Health Insurance Marketplaces and the People They Cover

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Yesterday, the Trump administration dealt a one-two punch to the Affordable Care Act’s health insurance marketplaces and the Americans who buy their health plans through them. The first blow was an executive order to federal agencies to write new regulations that would allow the sale of insurance products that skirt the ACA’s consumer protections. This change could leave millions of people either exposed to high health care costs or much higher premiums, and could lead to significant market instability. The second punch, which goes into effect immediately, is the administration’s decision to end payments to insurers for the ACA’s cost-sharing reductions (CSRs), which lower deductibles and other cost-sharing for lower- and moderate-income families.

The second punch has the power to be a knockout, triggering premium spikes and ultimately a mass exit of insurers from the marketplaces by 2019. Congress could effectively block the punch today by making a formal appropriation for the payments. Since insurers are required by law to offer the CSRs and the federal government is required to reimburse insurers for them, the Congressional Budget Office (CBO) has already assumed the cost of the CSRs in the federal budget baseline. This means that the appropriation is a formality: it would not increase the federal deficit. Senators Lamar Alexander and Patty Murray held hearings on stabilizing the marketplaces in September, with the CSR appropriation being the central policy proposal. Nearly all expert testimony supported making the appropriation.

Most states also planned tentatively for such a blow for the 2018 open enrollment period. According to Charles Gaba, as many as 12 states have not yet explicitly allowed insurers to increase premiums on either all their plans or just on the silver-level plans that offer cost-sharing. These premium increases will help ensure that carriers will remain in the marketplaces through 2018. The ACA’s premium tax credits will protect many consumers from feeling the effects of these increases. But the federal government will spend more on premium tax credits — by most estimates more than it would have spent on CSRs payments. And in some states, many people who are not eligible for tax credits will see their premiums rise. The states that assumed that CSRs would be paid will have to quickly decide on a response because the premiums have been set too low. While insurers in those states are allowed under their federal contracts to exit the marketplaces in the event the CSRs are not paid, Tim Jost notes that states have the authority to make the final decision on insurer withdrawals.


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