Covered California is set to announce its 2018 plan rates on Tuesday, August 1st. These rates will determine what health plans charge consumers for monthly premiums on the exchange. Covered California delayed announcing the premiums because of federal uncertainty over the future of the Affordable Care Act (ACA). Although Republican efforts to repeal the ACA failed last week, President Trump continues to rattle insurance markets by threatening to eliminate federal payments to insurers for cost-sharing reduction subsidies (CSRs). The subsidies are the subject of a lawsuit House v. Price, filed by House Republicans in 2014 which challenged the President’s authority to pay for the CSRs – even though they are an explicit part of the law. The case is now before the D.C. Circuit Court of Appeals, which has put the case on hold. Currently the federal government has only committed to funding CSRs through the month of May 2017.
The ACA provides two types of assistance for Covered California consumers who qualify: monthly premium support (the Advanced Premium Tax Credit or APTC) and cost-sharing reductions (CSRs) which are only available to Silver plan members. The subsidies help pay for the cost of medical care. Half of Covered California enrollees receive CSRs that on average reduce out-of pocket expenses by more than $1,500 per household per year or more than $1,000 for an individual. CSRs provide critical financial assistance to low-income Californians through reduced co-pays and cost California’s contracted health plans approximately $750 million. In order to simplify the burden on consumers, the ACA requires the federal government to pay these subsidies directly to health plans so consumers are not billed up front for the full cost of their care.
Unfortunately Republicans including President Trump have refused to provide clarity on whether they intend to continue CSR payments to insurers or not. This has caused some insurers to drop out of ACA marketplaces while others will have to raise their premiums next year to help mitigate the cost of CSRs they will be forced to bear. Soo Hee Kim of the Korean Community Center of the East Bay (KCCEB) helps families sign up for Covered California health plans. Mr. J., one of her clients, is considered at-risk for colon cancer and as a result must be screened every six months to ensure his cancer has not returned. The screenings, which cost hundreds of dollars, are covered by subsidies. The President is inaccurately painting CSRs as a “bailout” for insurers. In reality, ordinary people like Mr. J. a father of three young children in Oakland have the most to lose. “If not for his Silver 87 plan,” says Soo Hee, “Mr. J. would be paying three times as much for the preventive imaging and lab tests he needs to stay healthy for his family. He wouldn’t be able to afford treatment,” adds Soo Hee.
Fortunately, Covered California’s Board voted to protect consumers from higher prices as a result of the Administration’s lack of clarity on the future of CSR subsidies. Under a new Covered California policy, health plans will assume the costs of CSRs as part of their 2018 rate filings. But instead of distributing the costs to all consumers across the board, Covered California plans will distribute the entire increase onto the premiums for Silver level plans only. This is a smart idea because consumers eligible for Silver level plans can access the most generous tax credits to help offset the cost of their premiums. As a result, while Silver level consumers will see an increase in the gross cost of their premiums, they will also see an increase in the amount of financial assistance they receive, leaving their net payment virtually the same. For those consumers currently in Silver level plans but ineligible for tax credits, health plans will also offer an off-exchange product that is almost identical to the Silver Covered California exchange product without the hefty premium increase. Regulators hope consumers will be able to afford to purchase the same product and/or stay in the same plans next year.