Defunding Already-Budgeted CSRs Will Force Premium Spikes and Cause Confusion in Our Health Care Market

President Trump’s move to stop payment on $7 billion in aid to low-income Americans to afford health care is deliberately destructive and destabilizing. These cost-sharing reductions (or CSRs) are funds that have already been allocated to help reduce co-pays and deductibles for low-income consumers. This decision will force insurers to spike premiums to reclaim these dollars.

This shocking action is several steps beyond the sabotage of our health system, but more the equivalent of Trump swinging a baseball bat wildly in a china shop.

Not only is there is no discernible policy reason for this action, but taking away these already-budgeted funds does not save any money and increases costs for both consumers and the federal government. In California this action will cause unnecessary complexity and confusion, but in other states, it could cause the collapse of the individual insurance market.

The good news is that Covered California, California’s state-based individual health care marketplace, came up with a workaround to largely hold consumers harmless in our state. They announced yesterday that a “CSR surcharge” of 12.4% will be imposed on Silver-tier plans. Because this applies only to plans where people receive subsides to help cover the cost of their care, most of the consumers that see the surcharge will also see an increase in their aid, therefore experiencing no change in the cost of their coverage. Again, this was only made necessary because of the Trump Administration’s refusal to disburse these payments that to help Americans afford their health coverage.

There were more than 1.2 million subsidized Covered California members among the nearly 1.4 million people enrolled in CoveredCA as of March 2017. According to Covered California, an analysis on the impact of the CSR surcharge found that 78 percent of subsidized consumers would either see no change in what they would pay for insurance in 2018, or would pay less than what they would have paid if there had been no CSR surcharge. The remaining 22 percent will see some form of higher net premium because of the CSR surcharge, and about half of them will see increases of less than $25 per month.

There are long-term solutions. First, congress could take legislative action to appropriate these funds. Codifying them into law will give consumers the peace of mind of knowing the help will be there in the future. Second, it could be solved in the courts, which is the goal of today’s announcement by California’s Attorney General Xavier Becerra that he, and other Attorney’s General, will intervene in the case.

But both of these will take time. In the short-term consumers will be left to sort through the confusion. President Trump promised Americans that “everybody’s going to be taken care of much better than they’re taken care of now,” but these latest actions prove that he has no intention of making health care better, only to blow up the Affordable Care Act for political gain. All at the expense of American’s lives. 

Resources: 

Covered California: How Cost-Sharing Reductions Work and the Critical Role They Play in the Individual Market

Health Access Fact Sheet: Financial Help for Lower-Income Consumers at Risk

Health Access Analysis: 200,000 At Risk to Lose Cost-Sharing Subsides in 14 CA Republican Congressional Districts

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