Federal government faces $2.3 billion cost increase in 2018 if cost-sharing reduction payments are eliminated
On average, insurers remaining in ACA market would need to increase silver plan premiums by 19 percent to make up that gap.
Should the federal government end the Affordable Care Act's cost-sharing reduction payments to insurers, premiums for silver plans would rise by an estimated 19 percent and the cost to the federal government from the resulting increase in tax credits would be an additional $2.3 billion, according to a Kaiser Family Foundation report released Tuesday.
Insurers facing significant revenue shortfalls this year and next due to the end of CSRs could exit the ACA marketplaces, the Kaiser Family Foundation report said. Those insurers choosing to remain in the marketplace would need to raise premiums to offset the loss of the payments.
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The average premium hike would be 19 percent to silver plans. Cost-sharing benefits are only available to consumers who get silver-level plans.
The Congressional Budget Office estimates that the CSR payments cost $7 billion in fiscal year 2017, rising to $10 billion in 2018 and $16 billion by 2027.
While the federal government would save money by not making CSR payments, it would face increased costs for tax credits that subsidize premiums for marketplace enrollees with incomes 100 to 400 percent of the poverty level, the Kaiser report said.
The Kaiser Family Foundation report estimates that the increased cost to the federal government of higher premium tax credits would actually be 23 percent more than the savings from eliminating cost-sharing reduction payments.
For fiscal year 2018, that would result in a net increase of $2.3 billion. Over 10 years through 2027, the federal government would end up spending $31 billion more if the CSR payments end.
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Health insurance groups such as America's Health Insurance Plans, other healthcare organizations and state insurance commissioners have urged President Trump and Republican leaders to keep the cost-sharing reduction payments that insurers use to subsidize deductibles and copays for lower-income consumers who get coverage through the ACA.
Republican leaders in the U.S. House of Representatives brought a lawsuit CSRs in a case against the Secretary of Health and Human Services under the Obama Administration, saying the payments were illegal because Congress never appropriated the funds.
A district court judge ruled in favor of the House, but the ruling was appealed under Obama and the payments were permitted to continue pending the appeal.
Now that a Republican occupies the Executive Office, the case is in abeyance, with status reports required every three months, starting on May 22. The expectation is that President Trump would drop the appeal once Republicans have a bill in place to repeal and replace the Affordable Care Act.
Twitter: @SusanJMorse
