Tuesday, March 26, 2019

Why were CSR improvements cut from Frank Pallone's ACA 2.0 bill?

There's one glaring omission in Frank Pallone's newly introduced "ACA 2.0" bill*, which sweetens ACA marketplace subsidies, funds reinsurance and advertising/outreach, fixes the family glitch and adds sundry other repairs. The new version cuts out the enhancement and extension of Cost Sharing Reduction (CSR).  The bill introduced last March would have extended 94% AV CSR to 250% FPL, and offered 87% AV CSR all the way up to 400% FPL.

In conjunction with lowering the percentage of income required to buy a benchmark silver plan  at all income levels, the CSR enhancements would radically reduce out-of-pocket costs at incomes ranging from 201-400% FPL, where ACA takeup has been poor. Why the cut?

One possibility occurs to me, though I'm not sure of the logic behind it (so it may be wrong, of course).  ACA 2.0 is a showcase bill, with no chance of passing the Senate. Improved CSR, on the other hand, may be negotiable separately -- because the Trump administration is over a barrel with respect to CSR funding.

Recall, very briefly, that Trump cut off direct federal reimbursement for CSR in October 2017, notwithstanding that the ACA stipulates that insurers have to be reimbursed for it. The ACA drafters neglected to make the funding mandatory, leaving it to Congress to appropriate funds, and the Republican Congress never did so. Instead they sued to stop the payments the Obama administration was making, and won the first round in court, though the judge stayed her own order to stop payment. In October 2017 Trump stopped it anyway, stiffing insurers for the last three months of that year. As the move had been threatened for months, regulators and insurers were prepared: they priced CSR into 2018 premiums -- in most states, into silver plan premiums only, because CSR is available only in silver plans. Since ACA premium subsidies are income-adjusted and set to a silver benchmark, this "silver loading" created discounts in bronze and gold plans, which partly offset various other forms of sabotage.

Meanwhile, insurers sued -- and in recent months they've won a series of decisions. One judge --  Judge Sweeney of the Court of Federal Claims -- ruled that the federal government owed them the CSR reimbursement, not only for the three months they were stiffed in 2017, but for all subsequent years in which they're not directly reimbursed, even though they've been able to cover the costs via premium increases. Two other judges ruling in the several suits have indicated that the fact that insurers have "mitigated" the harm done to them does not necessarily negate the government's statutory obligation to reimburse them. The Treasury is thus at risk of paying double for CSR -- once in inflated premiums (CBO estimated that the pricing in of CSR would cost the federal government $194 billion over ten years) and then again in delayed reimbursement, plus interest.

Thus Republicans in Congress have some motive to acquiesce at last to appropriating funds to reimburse insurers for CSR. Not so fast, say Democrats. The discounts generated by silver loading (pricing CSR into silver plans only, and in most states, into on-exchange silver plans only) have boosted enrollment by several hundred thousand. CBO estimates that the practice will boost enrollment by 2-3 million within five years (partly offsetting actions by the Trump administration and Republican Congress that depress enrollment, e.g., individual mandate repeal, defunding of advertising and enrollment assistance, and promotion of medically underwritten short-term plans).

Democrats in Congress are fully aware of the silver loading bounty. Pallone, sponsor of the ACA 2.0 and chair of the House Energy and Commerce Committee, is also co-signatory** of a letter to CMS Administrator Seema Verma that lays out the benefits of silver loading and stipulates that loss of that benefit should be compensated for if CSR funding is appropriated:
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.
I don't know why including CSR enhancement in the showcase ACA 2.0 bill might impede any negotiation over appropriating CSR funding. Maybe it wouldn't; maybe the omission is simply about the bill's cost.  But it seems like a possibility.


* Officially named, with apparent willful clumsiness, the "Protecting Pre-Existing Conditions and Making Health  Care More Affordable Act of 2019."

** Other signers of the letter to CMS are Rep. Bobby Scott, chair of the House Education and Labor Committee, and  Senators Patty Murray and Ron Wyden, ranking members of the Senate Committee on Health, Education Labor and Pensions and the Senate Budget Committee, respectively.

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