Wednesday, February 20, 2019

Federal government's new CSR liability boosts Democrats' leverage in Congress

A word from our sponsor: subscribe, via box on right (requires email address only; you'll get 2-3 emails per week)

Good news: Democrats in Congress understand that if they're going to join with Republicans to appropriate funds to  directly reimburse health insurers for Cost Sharing Reduction (CSR), they need to extract a price. They have the leverage to demand a price -- and two federal judges increased that leverage last week in rulings that vastly increased the government's potential liability for stopping direct CSR payment.  A letter to CMS Administrator Seema Verma from Democratic Senators Patty Murray and Ron Wyden and Reps Frank Pallone and Bobby Scott flexes that leverage.

Briefly: The ACA directs the federal government to reimburse insurers for the CSR they are legally obligated to provide to marketplace enrollees with incomes below 250% of the Federal Poverty Level who select silver plans. In one of several fits of absent-mindedness, the ACA's creators neglected to make the payment part of mandatory spending, leaving it to Congress to appropriate funds. The Republican Congress did not appropriate; the Obama administration made the payments anyway; the Republican House sued to stop them; and Trump cut the payments off in October 2017. State regulators, having prepared during the long months that Trump threatened the cutoff, allowed insurers to price CSR into premiums for silver plans only, since CSR is available only with silver. Since income-adjusted premium subsidies are set against a silver benchmark, "silver loading" predictably created discounts in gold and bronze plans. That created a bounty for many subsidized enrollees with incomes too high to qualify for strong CSR -- i.e. those with incomes in the 200-400% FPL range.

The judges ruled, as another judge had in December, that the federal government is liable to insurers for unreimbursed CSR. One of them -- Judge Sweeney of the Court of Federal Claims --  ruled that the government is liable for CSR not only in 2017, when insurers were stiffed outright (as they couldn't price CSR into plans then in effect), but for 2018 and all years following, though insurers have been able to price the unreimbursed CSR into premiums since 2018. The other judge implicitly followed this logic: a contract is a contract, regardless of whether insurers were able to mitigate the damage, and in some cases even profit from the alternative route for CSR payment.  That ruling probably won't hold, but it could. All three judges ruling on CSR claims have indicated that "mitigation" does not necessarily negate the government's post-2017 obligation.

Against that backdrop, consider the letter to CMS from Patty Murray et al. It voices objections to various provisions in CMS's proposed annual rule updates for the ACA marketplace -- including an implicit threat to end silver loading as of 2021. The section ends with a conditional call to appropriate funding for CSR (my emphasis):
Silver loading should be retained to protect patients and ensure affordability. The proposed rule also requests comment on whether to end the practice of “silver loading”, which most states adopted in order to mitigate the effects of this administration’s damaging decision to end payments for cost-sharing reductions (CSRs). In the wake of this Trump administration sabotage, states have allowed plans to compensate for the lost CSR payments by “loading” the cost of these expanded benefits on to the silver-tier of coverage, ensuring that patients would not be harmed. As a result of “silver loading”, many patients gained access to bronze coverage with no monthly premiums and gold coverage with substantially lower premiums. We strongly urge your agency not to end this practice, as it would result in billions of dollars in increased costs for consumers and loss of coverage... Further, although we believe that funding for CSRs should be restored, this must be accompanied by a policy to hold consumers harmless, so that low-income individuals are not punished with higher premiums and deductibles.
It's actually not-so-low income enrollees -- those with incomes in the 200-400% FPL range -- who chiefly benefit from silver loading, but never mind. These chairs and ranking members of the  committees with primary jurisdiction over healthcare cite CBO's estimate that appropriating direct CSR funding for the years 2019-2022 would save $32 billion in federal spending and increase the uninsured population by 500,000 to 1 million. Previously, in August 2017, CBO estimated that ending CSR reimbursement (as Trump did two months later) would cost $194 billion over ten years. CBO has also estimated that silver loading will ultimately boost marketplace enrollment by 2 to 3 million.

If  Judge Sweeney's holding that the government is liable for CSR after 2017 survives, the federal government will effectively pay double for CSR as long as it goes unappropriated and un-reimbursed -- once via disproportionately inflated premiums, and again via direct reimbursement paid retroactively (doubtless with interest).  That could amount to a cool $20-30 billion per year. Trump's attempt to sink the ACA has potentially blown two holes in the hull of the federal treasury.

As the letter from Murray et al. indicate, a threat from CMS to end silver loading has hovered over the marketplace. The judges' decisions in the CSR litigation reduces that threat. No one is suggesting stiffing insurers and requiring them to provide CSR. The alternative to silver loading is "broad loading" -- spreading the cost of CSR evenly through all ACA-compliant plans. That practice would end the discounts that have boosted enrollment in the 200-400% FPL bracket and also held unsubsidized buyers harmless if they buy off-exchange, where, in most states, ACA-compliant silver plans with no CSR load are now available. Ending the discounts means reducing the "mitigation" for insurers, who will lose business -- and so increasing the government's pending CSR liability. Ending silver loading might also increase the odds that the decision will hold up, as at least one judge has seized on the effects of silver loading as evidence that the CSR cutoff did not cause harm.

Since 2015, progressive proposals have been kicking around to boost ACA marketplace subsidies across the board -- raising the actuarial value of benchmark plans against which premiums are set, reducing the percentage of income required to buy the benchmark plan at each income level, and  capping premiums as a percentage of income for people of all income levels.  Such proposals are embedded in "ACA 2.0" bills introduced in the Senate (by Elizabeth Warren) and in the House (by Frank Pallone).  Ending twice-paid CSR liability could probably pay for all of these subsidy enhancements. Leaving aside the legal liability, ending silver loading could pay for a substantial part of the (very similar) packages. As a price for eliminating the haphazard, unstable, confusing but still very valuable discounts generated by "silver loading," Democrats must demand a better designed subsidy enhancement.

Trump has made a career of stiffing contractors, suppliers and business partners, generally without consequence to him or his companies.  But the entity he currently presides over, the United States, is paying big-time in a case where he made a deadbeat of the federal government. Via Congressional compromise, his CSR stiffing could ultimately strengthen the ACA.

No comments:

Post a Comment