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The White House has punted on a key Obamacare decision, leaving health insurance plans in limbo and creating more uncertainty about what the law's marketplaces will look like in 2018.
The Trump administration faced an important deadline today. It had to let a federal court know whether it would continue to defend an Obamacare subsidy program that lowers copays and deductibles for low-income enrollees — a program that Congress argues in a pending lawsuit is illegal and should be halted.
In a joint filing, both the Trump administration and Congress asked the appeals court for the District of Columbia to put the case on hold for 90 days. They want an extension because they will "continue to discuss measures" that might negate the need for this lawsuit, such as repealing Obamacare.
This new filing doesn't explode Obamacare. But it does leave health insurance plans in limbo. The Trump administration could have said something much different today. It could have said it will no longer fund this subsidy program, an option the president was reportedly weighing as recently as last week.
It didn't go that far. The White House left the option of paying the subsidies on the table. Still, this isn't huge comfort to insurers that sell on the Obamacare marketplaces. They need to decide whether to sign up for 2018 by June 21. In order to set prices for those plans, insurers need to know whether this funding stream will still exist. Last year, it paid out $7 billion. Insurers want to know if those billions of dollars will be around next year too.
The filing today leaves the Trump administration the opportunity to end these subsidies at any moment. Here's what one health insurance actuary, Wesley Sanders, said about the filing:
@steveabowden @dmgorenstein @dcexaminer @rebeccastob Not really. Admin could still pull at any time and gives no clarity for 2018 rate filinns
— Wesley Sanders (@wcsanders) May 22, 2017
A Health and Human Services spokesperson tells Vox that the administration has already paid out the subsidies for May. But what happens in June, July, or any month going forward is uncertain.
“The May payment has been made," Alleigh Marré said in a statement. "Going forward, we are weighing our options and still evaluating the issues. Congress could resolve any uncertainty about the payments by passing the AHCA and reforming Obamacare’s failed funding structure.”
Premiums will spike in 2018 if insurance plans don't get more certainty around CSR subsidies. What insurance plans really want right now is a decision from Congress to appropriate the subsidies. That would get rid of the uncertainty around this issue completely.
If that doesn't happen — and it currently looks like it won't — insurance executives have told me they plan to try to raise premiums, reflecting an assumption that the CSR subsidies don't get paid.
“It’s pretty clear we need more certainty to be able to file the rates assuming we get those federal payments,” Paul Markovich, chief executive of Blue Shield of California, told me a few weeks ago. “Short of that, we’d have to assume they’re not being paid.”
Health insurers are notoriously risk-averse. They don't want to chance assuming these payments will get made — and not having the payments come through.
So far, most 2018 rate filings I've read assume that the Trump administration will pay the CSR subsidies. But most also include a cost retaining the right to revise that assumption, should they not get more certainty from the White House. We could be on track for a wave of revisions in late summer and early fall should the Trump administration not provide any additional clarity on their plans.
Ending the CSR program would actually cost the federal government money. Really! This is something my colleague Dylan Scott has written about previously, but it feels like a point worth repeating: The government would not save money by ending this program.
An analysis from the Kaiser Family Foundation estimates that the federal government would be on the hook for an additional $2.3 billion in spending if it stops paying out these subsidies.
The expectation is that insurance companies would spike premiums, which means the government would have to pay out higher premium subsidies to millions of Obamacare enrollees.
Chart of the Day:
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Today is as good a day as any to revisit the Kaiser Family Foundation's estimate of how ending the CSR program would spike subsidies. It estimates that premiums would rise, on average, 19 percent for midlevel silver plans — but that there would be huge variation across states.
Kliff’s Notes
Your daily top health care reads, with research help from Caitlin Davis
Today's top news
- "McConnell steps into Obamacare firing line": "McConnell's strategy is to keep the debate within his conference for as long as possible. There will be no public hearings as a bill is drafted, according to several Republican senators and aides, and he's imploring senators not to leak." —Burgess Everett and Jennifer Haberkorn, Politico
- "The price tag on universal coverage is in, and its bigger than California's budget": "California would have to find an additional $200 billion per year, including in new tax revenues, to create a so-called 'single-payer' system, the analysis by the Senate Appropriations committee found. The estimate assumes the state would retain the existing $200 billion in local, state and federal funding it currently receives to offset the total $400 billion price tag." —Angela Hart, Sacramento Bee
Analysis and longer reads
- "The obscure Senate rule that could sink Obamacare repeal, explained": "The restrictions of reconciliation will set the parameters of the Senate’s health care debate — and are already proving difficult for lawmakers to navigate and limiting what ideas they can consider." —Dylan Scott, Vox
- "Taking the nuclear option off the table": "Last Thursday, fifteen states and the District of Columbia moved to intervene in House v. Price, the case about the ACA’s cost-sharing reductions. At the same time, they asked the court to hear the case promptly. This is a bigger deal than it may seem, and could offer some comfort to insurers that are in desperate need of it." —Nicholas Bagley, Incidental Economist
"Don't let insurers hold Americans hostage for cost-sharing payments": "For insurers to assume that the cost-sharing reduction payments would continue through 2017, let alone 2018, required them to ignore 1) public warnings in articles like mine; 2) Collyer’s ruling; 3) the fact that President Obama would leave office on January 20, 2017; and 4) the apparent silence from both Hillary Clinton and Donald Trump during last year’s campaign on whether they would continue the cost-sharing reduction payments once in office." —Chris Jacobs, the Federalist
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