Just checking in with your periodic reminder that the very important issue of Obamacare’s cost sharing reductions has still not been resolved. If you’re a regular reader of DC Deciphered, I apologize, because you might be getting sick of hearing about this topic. But the cost sharing reduction (CSR) payments are so crucial to the survival of Obamacare – and therefore so crucial to the many millions of Americans who rely on Obamacare for health insurance – that I can’t let this issue get lost in the chaos of all the other ongoing crises of the Trump presidency.
I’ve talked about the CSR issue many times here before, so I won’t bore you guys by rehashing the full background again. For those who need a review of what the CSR issue is about, please take a look at this post, which gives a more detailed explanation of how the CSRs work and how we got into the dilemma we’re in with them today. But the extremely simplified version is that the CSRs help reduce out-of-pocket costs (costs other than premiums, for which there’s a separate subsidy) for certain low-income customers. Insurance companies take the hit up front by reducing the rates they charge these customers (for deductibles, co-pays, etc), and then the companies get reimbursed for that amount by the federal government.
However, since Trump took office, he & the Republicans have not been willing to guarantee that the CSR reimbursements will continue to be paid (see the above linked post for the explanation of why they’re able to do this). They won’t give insurance companies assurances that the government will make the payments in 2018, and in fact they won’t even assure them that the payments will continue for the rest of this year. Trump has been wielding this uncertainty as a weapon, repeatedly threatening to stop the payments, and then at the last minute saying he’ll continue them – but only for the next month. As of right now, there isn’t even an indication that the June payments will be made.
Without the payments, insurers, who are still bound to offer eligible customers the reduced rates, will lose huge amounts of money (CSR reimbursements totaled around $7 billion in 2016). As a result, companies will be forced to either withdraw from the markets or raise premiums dramatically. This will obviously be (and is already starting to be) greatly damaging to the Obamacare markets, and in some locations it may even prove fatal. In fact, as I was in the process of writing this post, news broke of another insurer pulling out of an Obamacare market, in large part due to the uncertainty surrounding the CSRs:
Trump and/or the Republicans could solve this problem right now by guaranteeing long term funding of the CSR reimbursements. Instead, they are all refusing to do anything, despite repeated pleas from the insurance industry.* The more time that passes with no action from them, the greater the risk to the markets becomes, and with the deadline for companies to make their decisions about 2018 right around the corner, we’re about to hit the real inflection point. Yet, with the health and well being – and in some cases lives – of millions at stake, they do nothing. This should be a HUGE scandal, but it’s only garnered a small amount of attention from the press and from elected Democrats. And I’m not sure why.
But finally, some insurance executives at least are starting to speak out about it. In a post last month, I wrote about the first few industry executives who were speaking out about the damage the Trump administration was doing by not funding the CSRs. Now we have a couple more adding their voices to the mix in order to stress how essential the CSRs are to a healthy marketplace.
The CEO of Blue Cross Blue Shield in North Carolina recently spoke to both The Plum Line and Vox about how the lack of certainty with the CSRs is affecting his decision making for next year. CEO Brad Wilson told The Plum Line that he had to work from the assumption that the CSRs would not be funded, and based on that, he filed a 22.9% premium increase for 2018. If the CSR payments were guaranteed, the rate increase would have been only 8.8% instead. Here’s an excerpt from Greg Sargent of the Plum Line, who conducted the interview:
The failure of the administration and the House to bring certainty and clarity by funding CSRs has caused our company to file a 22.9 percent premium increase, rather than one that is materially lower,” Wilson told me. “That will impact hundreds of thousands of North Carolinians.” The company says it has approximately half a million customers getting individual insurance via Obamacare . . .
“The effect will be the same across the country,” Wilson predicted. “Rates will be materially higher if CSRs aren’t funded.”
Wilson told Sarah Kliff at Vox that “The biggest single reason for that rate increase is the lack of the federal funding for CSRs in 2018.” He also told her that he met with several Republican leaders (Tom Price, Mitch McConnell, Paul Ryan) to explain to them how urgent it was to get the CSRs funded.
However, not only are Trump & Republicans refusing to solve the CSR problem, they are capitalizing on the resulting damage to Obamacare, citing the insurer withdrawals & increased premiums as a reason that it’s urgent for their health care bill to pass Congress. Just this week, the White House specifically cited North Carolina as an example of Obamacare’s “skyrocketing premiums” and used this to justify the rushed legislative process they’re pushing on their health care bill. This completely ignores what we know directly from the CEO’s own telling: those premium increases are the direct result of Trump’s own actions (or inaction to be more precise).
Despite that, if you the read the rest of the Vox interview with Wilson, you’ll see that he makes a heroic effort not to criticize the President or Republicans in any way. He sticks very carefully to commenting only on how this particular policy is affecting the company’s decision making. He makes sure to give Republicans the benefit of the doubt in every way that he possibly can, and doesn’t impute any motive to their actions (or lack thereof). His comments here clearly aren’t any sort of partisan griping or part of an agenda against Republicans or any ill will on his part. He’s very assiduously not making it about them. So when he tells us what an enormous impact the lack of certainty is having on his company – and likely on others across the country – I think we can take that seriously.
Another insurance executive – or more accurately former insurance executive – who’s speaking out is J. Mario Molina, until recently the CEO of Molina Healthcare. And Molina is not holding back, possibly because he has nothing to lose at this point – though he was quite outspoken even before he was fired from his post at Molina Healthcare (in fact, he believes that was the reason he lost the job). Molina wrote an op-ed that appeared in U.S. News World Report last week. The title (which I assume he didn’t choose, but very accurately fits the content of the op-ed) is You’ve Been Duped. And the subhead is: The Affordable Care Act Isn’t Raising Your Premiums. Republicans Are.
Molina’s article doesn’t focus on just the CSR issue, he actually talks about a number of different ways in which Republicans have sabotaged Obamacare, harming its implementation and making it more expensive than it needed to be. I previously discussed those GOP sabotage maneuvers here and here. He then talks about how it’s doubly devious of the GOP to use the results of their own sabotage to try to justify their awful replacement bill. Molina writes:
When confronted with the dire projections about how their bill will make insurance unaffordable for their constituents, most of the representatives who voted for the bill often echo a line that Republican House Speaker Paul Ryan, Secretary of Health and Human Services Tom Price and Trump have used repeatedly: that the Affordable Care Act is in a so-called “death spiral” that will inevitably “explode,” so they need to pass a bill, no matter how terrible, before it does. That narrative is patently false. In fact, most of the instability driving up premiums in the marketplace can be directly traced to Republicans’ efforts to undermine the health care law for their own political purposes . . .
Since Trump took office in January, these kinds of sneak attacks on the law have accelerated . . .
Then he gets to the CSR issue, which – he points out – has been their most effective form of sabotage:
Perhaps the most drastic way that the Trump administration is sabotaging American’s health insurance is by refusing to commit to reimbursing health plans for the cost-sharing reduction payments they make to lower out-of-pocket costs for their lowest income members. Insurance companies are currently in the process of determining their rates for the 2018 plan year, and without a guarantee from the administration that they will receive the payments they are owed, they will factor that added cost into their premiums for next year. And you don’t have to take my word for it – the Kaiser Family Foundation estimates that insurers would need to raise premiums for silver-level plans by an average of 19 percent to compensate if the administration will not commit to making the cost-sharing reduction payments.
And Molina closes with the point I’ve been trying to hard to drill home with my many posts on this topic, but he puts it better and more simply than I’ve been able to. And as the former CEO of a major health insurance company, he’s among the small group of people in the country who has the real first-hand credibility to say it:
One common thread in all these efforts is that Americans who purchase their health coverage through the individual market are the ones harmed, not insurance companies. The administration and Republicans in Congress want you to believe that insurers raising premiums for their plans or exiting the marketplaces all together are consequences of the design of the Affordable Care Act instead of the direct results of their own actions to sabotage the law. Don’t let them fool you.
So please, don’t sleep on this issue. Bug your local representatives about. Write to your paper about it. If you have any contacts with political reporters, request that they ask Republicans officials and/or the Trump administration about it. Even if this issue doesn’t directly affect you, it almost certainly affects a friend or relative or neighbor. We can’t let this issue slide . . .
*NOTE: There have been some rumblings that Senate Republicans may include “stabilization” provisions in their version of the Obamacare replacement bill. It’s possible this would include a guarantee that the CSR payments will be made until the GOP plan is implemented, but there hasn’t been much reporting on this, and no one seems sure of the details.
Also it’s unclear how many Senators are on board with this idea or whether the Senate would be willing to do anything on the issue if their broader health care bill is unable to pass the Senate. Additionally, it’s not clear whether such provisions would be able to pass the in the House. But it’s still a little glimmer of hope to see that the issue is at least being raised by some of those who have the power to do something about it.