Fight Over ACA Subsidies Could Shut Down Government

April 14, 2017

A fight over the stability of the insurance marketplaces created by the Affordable Care Act (ACA) threatens to destabilize the federal government.

It's as complicated as a tax return and as simple as a standoff between two schoolyard combatants.

Congress needs to pass a spending bill by April 28 to keep the federal government running. With filibuster power in the Senate, congressional Democrats say they'll withhold their needed support unless the bill continues to fund so-called cost-sharing reductions (CSRs) for lower-income individuals who buy health plans on the ACA marketplaces, also called exchanges. CSRs lower an enrollee's out-of-pocket expenses, in some cases shrinking a four-figure deductible to three figures.

Health insurers must give lower-income enrollees these cost breaks, but they get reimbursed by the government for doing so. Of the 11.1 million enrollees in ACA exchange plans in 2016, almost 60% qualified for CSRs. The government underwrote these subsidies by giving insurers $7 billion.

CSRs funding is considered crucial for the survival of the ACA exchanges, already weakened by the departure of several large insurers, most recently Aetna in Iowa, that say they can't make a profit on them. Loss of CSR reimbursements would chase more insurers from the exchanges, warned a group of healthcare industry groups, including the American Medical Association and America's Health Insurance Plans, in letters  to Congress and the White House this week. They also projected that insurers remaining in the exchanges would raise their premiums by at least 15% if they lost CSR funding, putting coverage out of reach for some consumers.

These subsidies were targeted for elimination in a House Republican bill to repeal and replace the ACA. House Speaker Paul Ryan (R-WI) withdrew the measure last month when he couldn't find enough votes on either side of the aisle, but President Donald Trump this week told the Wall Street Journal that he may cut off the subsidies to pressure Democrats into renegotiating a repeal-and-replace bill. "Obamacare is dead next month if it doesn't get that money," Trump was quoted as saying.

That move is well within Trump's power. In 2014, House Republicans sued the Obama administration in federal court, saying that they never appropriated the CSR reimbursements to insurers, making them illegal. A federal district court judge in Washington, DC, agreed. The payments have continued while the case is under appeal. As the new defendant in the legal battle, the Trump administration simply could let the lower court ruling stand.

Trump's threat to stop the CSR funding spurred a counter-threat from congressional Democrats — follow through, and we may block a new omnibus spending bill and shut down the government.

"The President's comments on stopping the cost sharing reduction payments will increase costs, is a threat to the good health of the American people, and a threat to keeping government open," an aide to House Minority Leader Nancy Pelosi (D-CA) told Medscape Medical News today. Democratic leadership in both the House and the Senate, the aide said, is demanding that the spending bill include CSR payments and make them permanent and mandatory.

Democrats are trying to use the Republican victory in the CSR court case to their advantage. If the federal judge said Congress needs to appropriate the funds, their argument goes, Congress should go ahead and do it.

Congress is now on a spring break. It will reconvene in the last week in April.

New Regulations Designed to "Encourage Stability"

While Trump threatened to sink the exchanges, his administration this week issued new regulations to "encourage stability" in them.

The so-called Market Stabilization rule from the Centers for Medicare and Medicaid Services (CMS) makes a number of changes sought by insurers who said consumers were gaming the exchange system. Individuals who want to sign up for a plan outside the annual enrollment period will need to supply more documentation that they've changed jobs, gotten married, or met some other eligibility requirement for special consideration. CMS instituted this policy to make it harder for people to wait until they're sick to purchase coverage.

The new rule also shortens the annual enrollment period from 3 months to a 6-week period beginning November 1 this year and ending on December 15. CMS said this change more closely aligns the ACA exchanges with enrollment periods for Medicare and the private market, and encourages people to sign up before the start of the new year. However, ACA supporters contend that the shorter period could actually reduce exchange enrollment.

Under the new regulations, individuals who lose coverage because they fall behind on premium payments cannot sign up for another plan with the same insurer until they catch up on what they owe. "This is intended to address gaming and encourage people to maintain continuous coverage throughout the year, which will have a positive impact on the risk pool," CMS said.

More information about the new exchange regulations is available on the CMS website.

Follow Robert Lowes on Twitter @LowesRobert

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