Absence of CSR Subsidy Payments Likely to Result in Significant Losses for Marketplace Insurers
FOR IMMEDIATE RELEASE: February 8, 2017
FOR MORE INFORMATION: Jeff Van Ness, (202) 204-7515, jvanness@communityplans.
STUDY: ABSENCE OF COST-SHARING REDUCTION SUBSIDY PAYMENTS LIKELY TO RESULT IN SIGNIFICANT FINANCIAL LOSSES FOR INSURERS PARTICIPATING IN MARKETPLACES
Financial losses likely to be greater in states that did not expand Medicaid under the Affordable Care Act
WASHINGTON – A new study released today by the Association for Community Affiliated Plans (ACAP) and researched by Milliman, Inc. examines the potential impact to the health insurance industry as a whole, and ACAP-member Safety Net Health Plans in particular, should federal cost-sharing reduction (CSR) subsidy payments to insurers participating in Health Insurance Marketplaces be left unpaid for the 2017 coverage year.
The study examines the extent to which insurers participating in Marketplaces receive CSR payments from the Federal government. Cost sharing reductions are a key feature of the Affordable Care Act, which mandates that insurers reduce the cost of out-of-pocket expenditures such as copays, deductibles and coinsurance for households whose incomes qualify them for such reductions—only households with incomes below 250 percent of the Federal Poverty Level are eligible. Cost-sharing reductions may keep consumers from forgoing needed medicines or care owing to unaffordable deductibles or copays.
Because health plans serve as a pass-through to reconcile and streamline these payments for consumers, they do not account for the cost of CSRs in setting their premiums. The funding mechanism for CSR subsidy payments to insurers is at issue in House v. Burwell, potentially leaving issuers liable for new, unintended costs.
Health insurers were reimbursed for average annual CSR payments of more than $900 per twelve- month enrollment period – altogether, $2.83 billion for 3.1 million average monthly enrollees in 2014 and $4.9 billion for 5.2 million average monthly enrollees in 2015. For the first half of 2016, the Centers for Medicare & Medicaid Services (CMS) announced that nearly 5.9 million—roughly 56% of average monthly marketplace enrollees—received CSR subsidies.
One of the study’s notable findings is a wide disparity in the proportion of CSR revenue for health plans in states that expanded Medicaid versus states that opted out of the expansion. This is a result of households with income between 100% and 138% of the federal poverty level being eligible for marketplace subsidies in non-expansion states. In 2015, CSR payments equaled 4.8 percent of premiums for plans in expansion states, while the proportion for states in non-expansion states was more than double – 10.2 percent.
“This study makes clear the extent to which the immediate cutoff of CSR payments, absent an appropriation from Congress, would sow chaos in the individual market,” said Margaret A. Murray, CEO, ACAP. “It’s hard to imagine that many plans faced with using reserves to fund CSRs for a meaningful period of time would be able to remain in the market. Many, if not most, would be forced out.”
The study also found that ACAP-member Safety Net Health Plans – not-for-profit, community-based plans – received a higher proportion of CSR payments in 2015: 10.6 percent of premiums, versus 7.8 percent for the industry as a whole. As Safety Net Health Plans focus on serving low-income populations and serve fewer off-marketplace enrollees, the prospective elimination of CSR funding would expose Safety Net Health Plans to greater risk than many commercial issuers.
Even insurers that could weather the loss of CSR payments would be forced to make up the difference elsewhere. “The loss of CSR payments in 2017 would trigger significant losses for many insurers in the individual market,” the study notes. “For some insurers, additional funding or higher future premiums may be needed to maintain risk-based capital requirements.”
The study is available in full at www.communityplans.net.
ACAP represents 59 nonprofit Safety Net Health Plans in 28 states, which collectively serve more than seventeen million people enrolled in Medicaid, Medicare, the Children’s Health Insurance Program (CHIP), Marketplaces and other publicly-supported health programs.
For more information, visit www.communityplans.net.