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By Mark Tosczak and Rose Hoban
Heather Sorrell is counting down to Nov. 1. That’s when open enrollment starts for the plans bought through the Affordable Care Act’s health care exchanges.
But after the Trump administration announcement late Thursday that it was going to halt payments to insurers for cost-sharing reductions (CSRs), she’s worried about her options.
Sorrell, who runs a childcare center in Burlington, will tell you her Blue Cross and Blue Shield of North Carolina silver plan is not perfect. The physician she’s seen for years isn’t in her provider network. But it’s a lot better than nothing.
Sorrell has multiple sclerosis, and she knows that if she had to buy insurance on the open market it would be much more expensive. The $485 per month plan costs less than $60 per month once her ACA tax credits are factored in.
“We do fine, but we don’t do so well as to be able to say ‘Oh, sure, I can drop $500 per month on insurance premiums with no assistance from an employer,’” she said. Stress is a trigger for multiple sclerosis flare-ups, so she’s trying not to worry too much about what she might encounter on Nov. 1.
The effects of halting the CSR payments will likely be limited in North Carolina, at least for 2018 coverage. People who buy plans through the exchange but make too much money to qualify for premium subsidies will likely bear the brunt of the individual impact.
Ironically, the move makes it likely that even more federal tax dollars will be pumped into ACA plans.
It also prompted North Carolina Attorney General Josh Stein to sue the federal government. In a statement, Stein called the Trump decision “unlawful and reckless.”
“His act wreaks havoc on the health care system,” he said. “It will lead to higher insurance costs for individuals, cause insurance companies to leave the individual health insurance market, increase the number of people without health insurance, and cost taxpayers $194 billion over the next 10 years. It also violates the law and the Constitution.”
Under the ACA, there are two types of subsidies designed to make insurance purchased on from state exchanges more affordable.
The first kind are premium tax credits. These are payments that help people who earn up to four times the federal poverty level pay their monthly insurance premiums.
The Trump administration action doesn’t affect these subsidies.
The second kind are cost-sharing reduction payments, the kind the federal government halted Thursday. These payments are made directly to insurance companies to allow them to reduce out-of-pocket costs, such as co-pays and deductibles, on silver level plans – like the one Sorrell has.
Only people who buy silver plans get the out-of pocket help.
The cost-sharing reduction payments do add up. In 2016, according to a Center on Budget and Policy Priority study, insurers offering ACA plans receive $561 million in such payments in 2016.
Blue Cross and Blue Shield, the only insurer now offering ACA plans in all 100 North Carolina counties, would have been in line to receive most those CSR payments next year — at least until Thursday’s action. (Cigna is offering plans in six counties and had about 21,000 signups last year, compared to about 502,000 for BCBSNC.)
But CSR payments have been under threat for months, and in BCBSNC factored that possibility into the rate increases they requested for 2018 plans. That’s why their premiums are going up 14.1 percent next year.
“They predicted this would happen,” said Don Taylor, a health economist at Duke’s Sanford School of Public Policy. “They priced their premiums assuming the Trump administration would do this”
Taylor added that if Trump had stopped the payment on his first day in office, “it would have been a lot bigger deal.”
Taylor called the underlying premium growth for BCBSNC plans “very stable” at about 5 percent.
The real bottom line for consumers in North Carolina who get premium subsidies is that they probably won’t see big increases in their insurance costs this year. But there’s still a cost to the cuts in the CSR payments.
Who gets hurt
For one, people who aren’t eligible for premium subsidies are going to end up paying higher premiums in 2018 than they otherwise would have.
“Those are people above 400 percent of poverty,” Taylor said. “Like a family making $125,000 who are self insured and they have a sick kid? I mean, they will get pounded over time.”
That’s the case for Jack Register, who earned $77,500 as the director of a not-for-profit last year. But this spring, he set out on his own as a business consultant and a therapist in private practice.
“My insurance company offered me a pretty decent discount when I first bought my policy, because they were getting subsidized because of the exchange marketplace,” said Register, who is 43. His monthly premium for a BCBSNC plan was about $500, which he said he could afford.
He expected his premium would go up for next year, because that’s what always happens.
“I’m somebody with a preexisting mental health condition, my policy is always expensive,” Register said. “Then I received a message from them last night saying that because they were no longer guaranteed the federal subsidies, that they would no longer be able to offer the discounts for individual people.”
He talked to someone at Blue Cross for an hour Friday morning and it became clear that his premium would jump to about $900 per month.
“That is not something I can afford,” Register said. He paid up through November, and then after that, he said he’ll go without.
He could buy a catastrophic plan.
“But I don’t really need a catastrophic plan, I need all the other things that go with insurance,” he said.
Open enrollment opens soon
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Information courtesy: Legal Aid of NC
“Although it feels like this is really impacting for consumers, there’s actually less instability than it seems,” said Jennifer Simmons, who works for Legal Aid of North Carolina and is helping to organize the push to sign up people during open enrollment.
That’s in part because of Blue Cross’ decision earlier this year.
“We’re concerned people might be confused by this week’s pronouncements,” Simmons said. “We want folks to know that hundreds of thousands of North Carolinians will continue to get generous premium subsidies that will make plans affordable for them.”
Taylor said that ironically, Trump’s action could paradoxically raise the overall cost of the ACA to taxpayers.
“It turns out to be more efficient just to do the cost share subsidies than to build it into all the premiums,” Taylor said. “Which is what’s gonna happen by default.”
That’s because premium subsidies are based on the premiums themselves — larger premiums means larger subsidies. Because costs that had been covered by CSR payments will now be covered out of higher premium payments, halting CSR payments has the effect of increasing premium subsidies.
In fact, some studies suggest that it may cost the federal government more this way. The Kaiser Family Foundation estimated that the “premium-only” subsidy structure created with the cancellation of CSR payments could end up costing the federal government 23 percent more than if the CSR payments stayed in place.
The CSR payments have been a contentious subject in Washington since 2014, when the U.S. House of Representatives filed a lawsuit contending the payments were illegal because Congress hadn’t specifically allocated the money in the budget.
The Obama administration argued in court that the payments were allowed because they were authorized in the Affordable Care Act. In the spring of 2016, a federal judge ruled in favor of the House, but delayed the ruling pending an Obama administration appeal.
In August, more than a dozen states were granted approval to intervene in the federal lawsuit to represent state interests, as it became clear the Trump administration might not continue the case through the appeals process.
This year, insurance companies and state regulators have publicly fretted about whether the payments would continue. The Congressional Budget Office estimated that CSR payments would total about $7 billion in fiscal year 2017.
As open enrollment for 2018 approaches, the only thing that seems certain is that the lawsuits and political wrangling will continue.