Late Thursday, Oct. 12, the Trump Administration announced it would stop making the cost-sharing reduction payments to health insurers. On the next day, in a filing with the U.S. Court of Appeals in the District of Columbia, the administration confirmed it planned to cease making the payments because they were unauthorized.
Under the current law, health plans must offer the cost-sharing reduction subsidies to low-income consumers in the form of lower co-pays and deductibles, with the federal government reimbursing carriers for the difference in costs, according to James Scullary, communications and public relations officer for Covered California.
Covered Cal already planned to ensure that health plans could participate in 2018 by adding a surcharge to make up for the potential loss of those reimbursement payments, which are roughly estimated to be worth $800 million or more to California consumers in 2017.
In the original case, the House of Representatives sued to stop the payments because Congress had not approved any appropriations action that authorized making the payments. This argument convinced the federal district court in the District of Columbia in 2016.
The case is being appealed. After nearly nine months in office, President Donald Trump has authorized his Department of Health and Human Services, along with the Centers for Medicare and Medicaid Services, to stop these payments.
Based on an opinion from the attorney general’s office, on Thursday, Eric Hagen, the acting Secretary of HHS, ordered CMS to halt the payments.
“In light of that opinion — and the absence of any other appropriation that could be used to fund CSR payments — CSR payments to issuers must stop, effective immediately. CSR payments are prohibited unless and until a valid appropriation exists,” he wrote to Seema Verman, CMS administrator.
The cost-sharing reductions are part of the Affordable Care Act and made to health insurance companies to cover their losses for insuring low-income individuals.
It is not clear whether the payments will stop immediately in October or later for 2018. Many people feel the companies may pull out of states in which they need the payments or raise their premiums to unaffordable levels for low-income families.
In California, Covered Cal released a statement last week saying it was prepared for this event and California residents need not fear the loss of their insurance, according to Scullary.
California’s health plans will included a “surcharge on Silver-tier plans for the 2018 coverage year.
“However, because the surcharge is only being loaded onto Silver-tier plans, those who purchase coverage without getting federal help — whether through Covered California or by buying directly from health insurance companies — can be protected from paying any surcharge. Most Covered California consumers who receive financial help in the form of an Advanced Premium Tax Credit, or subsidy, will not see a change in what they pay for their insurance in 2018 because of the surcharge, and many will actually end up paying less because their subsidy amount will increase more than the surcharge,” the press release stated.
Covered Cal issued its press release Wednesday, Oct. 11, because, “We couldn’t wait any longer,” Scullary said.
Scullary also emphasized that the open season begins Nov. 1 and continues through January 2018, unlike the federal program, which ends Dec. 15.
