Key Takeaways
In 2016, about 60 percent of all enrollees who received coverage in the exchanges, or 6.4 million people, benefited from reduced cost-sharing (e.g., deductibles, co-payments) due to cost-sharing reductions (CSRs).
While CSRs provide real value and extra savings to consumers, health plans receive no net financial gain because CSR funding is only for covered healthcare treatments and services (e.g., physician visits, drugs) provided to eligible enrollees.
If CSR funding is eliminated, consumers at all income levels would face substantially higher total monthly premiums and likely have fewer choices due to plans leaving the market, and hardworking taxpayers will pay billions of dollars in extra costs.
Summary
Currently, there are two primary mechanisms in the individual health insurance exchanges that work to improve affordability for consumers:
- advance premium tax credits (APTC) to reduce monthly premiums; and
- cost-sharing reductions that reduce out-of-pocket expenses for lower- and moderate-income individuals and families.
CSRs make health care more affordable for millions of individuals and families by reducing patient cost-sharing鈥攖hat is, deductibles, co-payments, and/or annual maximum out-of-pocket (MOOP) limits. In 2016, about 60 percent of all enrollees with exchange coverage, or 6.4 million people, benefited from a reduction in their overall cost sharing due to CSRs.1 These benefits go directly to consumers 鈥� a recent Kaiser Family Foundation analysis found that CSRs reduced the average deductible for enrollees in the lowest income bracket by $3,354.2 While CSRs provide real value and savings to consumers, health plans receive no net financial gain. They simply act as an administrator of CSR payments to providers for covered treatments and services received by eligible enrollees. Consequently, program funding is based on the actual cost-sharing reductions paid to providers for the health care they provided to eligible individuals.
The authority for government funding of the program is currently under legal dispute between the U.S. House of Representatives and the U.S. Department of Health and Human Services (HHS).3 This dispute is creating significant market uncertainty about the availability of CSR funding for consumers in 2017, 2018, and beyond.
State filing deadlines for the 2018 plan year generally require health plans to make decisions about products, rates, and market participation in the second quarter of 2017. The current deadline to file products on the federally-facilitated marketplace (FFM) for 2018 is June 21, 2017. As a result, health plans need to understand all applicable rules and have certainty regarding the regulatory and financial market stability of the individual market in 2018 before making these decisions
If CSR funding remains unpredictable or is discontinued, health plans will have to make difficult decisions about market participation in 2018. They will have to choose between not participating in some or all segments of the individual market鈥攅.g., exchanges鈥攐r increasing premiums for all enrollees to cover the cost of providing CSRs to consumers鈥攁n estimated $10 billion in 2018.4
If health plans decide to not offer coverage through the exchanges in 2018, consumers would have fewer coverage options, including the possibility of no plans eligible for APTCs or CSRs in some counties. Rising premiums would result in significantly higher costs for all enrollees, including lower- and moderate-income consumers, and would result in increased federal spending on APTCs, imposing billions of dollars in extra costs on taxpayers.