Dithering on CSRs Results in Premium Spike

A key Senate Republican, Lamar Alexander (R-Tenn.) worked this week to show President Donald Trump that the bill Alexander crafted with Democrat Patty Murray (D-Wash.) helps consumers – not insurers – by funding cost-sharing reductions (CSR).

Trump recently cancelled the monthly CSR payments to insurers which help lower-income people afford co-pays and deductibles on health plans they buy through insurance exchanges. In cancelling the payments, the president called on Congress to resolve the issue – which is what the bipartisan Alexander-Murray bill attempts to do.  After the bill was rolled out on Tuesday, the president offered his tentative support, followed by his criticism of the plan, followed by Alexander’s effort to get Trump on board.

The uncertainty has a clear and quantifiable downside – insurance premiums will spike upward in 2018. The Massachusetts exchange, the Connector, had been waiting to determine which set of rates it would use for 2018 open enrollment which begins November 1 – either ones that assume the CSRs or rates that did not. As it prepared to communicate to enrollees on the 2018 health plan options, the Connector was forced this week to assume there will be no CSRs given the White House and Congressional inaction.

On Thursday, Governor Charlie Baker wrote to the entire Massachusetts Congressional delegation informing them that because of the inability to fund the cost-sharing reductions, insurance premiums through plans on the Connector will rise by 18% above the expected 8% – a 26% total increase on average.

“Some members will be protected from these increases because they will receive offsetting premium tax credits,” Baker wrote. “As you know, this means the failure to fund the CSRs will actually cost the federal government more because of the increase in spending on premium tax credit subsidies. However, up to 80,000 members are not eligible for premium tax credits and will face the full impact of these premium increases.”

Baker also noted the cessation of CSRs creates a $28 million unfunded liability for insurance carriers through the end of calendar year 2017.