Cost-sharing reduction payment program

Cost-sharing reduction payment program

On October 12th, President Trump announced that his administration would no longer make cost-sharing reduction payments (CSRs) to insurance companies selling Qualified Health Plans on the Affordable Care Act (ACA) exchanges.  In announcing this decision, the president noted that the discontinuation of these payments was in line with a 2016 federal court ruling that the executive branch did not have the legal authority to make these payments as Congress had not appropriated the dollars for this program. 

The 2016 ruling came in response to a lawsuit brought by the GOP controlled House of Representatives in 2014.  Lawyers for the House of Representatives argued that the House had never appropriated the money for the CSR program so the Obama administration decision to take money appropriated for other purposes and repurpose it to the CSR program was unconstitutional.  The federal court agreed that the payments were unconstitutional; however, the court “stayed” this order pending an appeal of the decision by the Obama administration. 

In effect, the Trump administration was announcing its intent to abide by the ruling of the court even though the appeal was still pending. 

What are CSR Payments?

Under the Affordable Care Act, health plans must offer policies with dramatically lower deductibles and co-insurance for individuals with incomes between 100% and 250% of the Federal Poverty Level (FPL).  These subsidies go directly from the federal government to the insurance companies and are in addition to the Advanced Payment Tax Credits available to low-income individuals to limit the amount of their out-of-pocket costs for health insurance premiums.

How do CSR payments work?

A typical Silver level plan sold on the exchange would have a deductible of $3,600 per person.  If, however, the individual/family purchasing this plan had an income between 100% and 250% of the FPL, they could purchase this plan with a deductible as low as $300 per person.  Normally, a health insurance plan with a $300 deductible would have a very high premium. 

Under the CSR program, the insurance company is prohibited from charging the low-income individual the premium that would normally apply to a low-deductible plan.  The CSR payments are intended to compensate the insurance plans for the premium dollars they could not collect from those qualifying for participation in the CSR program. It is estimated that the CSR subsidies will cost the federal government between $7 and $8 billion dollars in 2018.

Does this mean the end of this program?

Not necessarily.  The court ruling upon which the Trump administration was basing its decision, is largely predicated upon the idea that Congress did not approve the funds for the CSR program.  If Congress were to enact the legislation necessary to both authorize and appropriate the CSR money, the Trump administration’s position becomes moot.

Subsequent to the president’s announcement that he was discontinuing these CSR payments, Senators Lamar Alexander (R-TN) and Patty Murray (D-WA) announced they had reached a bi-partisan agreement to enact the laws necessary to comply with the finding of the federal court.  On October 18th, Alexander and Murray introduced legislation along with 22 of their colleagues (11 Republicans and 11 Democrats) so the Trump administration could legally make the CSR payments to health plans. Although it is refreshing to see an effort at bi-partisanship when it comes to the Affordable Care Act, it is not clear that a majority of their colleagues in the House and Senate agree with the legislative proposal they have crafted. 

The College will continue to monitor developments on the continuation (or discontinuation) of the CSR payments program.