I need to start morning drinking after the following exchange this morning.
It started with Politico reviewing what some carriers are thinking about doing if the Cost Sharing Reduction subsidies are pulled if the Trump Administration drops an appeal a loss to the Court of Appeals.
That lawsuit challenged the Obama administration’s authority to fund those subsidies, and prevailed in a federal district court ruling last spring. The Obama administration appealed that decision. But if the Trump White House doesn’t continue that appeal, and Congress fails to appropriate funding, the subsidies would end.
Insurers would likely bolt from the health law’s markets if that happens because they’d still be on the hook for providing reduced costs to their customers, but with no guarantee they’d ever be reimbursed by the federal government, say experts….
Ken Janda, CEO of Community Health Choice, a Houston-based nonprofit health plan with nearly 150,000 customers, said the insurer would shift customers into less robust coverage that wouldn’t trigger the subsidies if the funding disappears. But that would mean that Obamacare customers with incomes below 150 percent of the federal poverty level — or less than $18,000 for an individual — would go from paying nothing to see a doctor or get a prescription, to having a $1,500 deductible before most of their insurance kicks in
How I read this (along with a few other tweeps) is that CHC would try to move people who had Silver 94 or Silver 87 with CSR to Gold plans after they pull their Silver plans from the market. CMS in their 2017 QHP contracts allowed carriers to pull products from the market if the CSR subsidies disappear and it looks like that would be the plan of CHC to pull their Silvers. My immediate thought on this is that this would be a massive adverse selection problem. People on CSR with 94% Silver or 87% Silver make under 200% FPL. They are getting subsidized as they are buying Silver. If they are switched to Gold or Platinum their monthly post-subsidy premiums will dramatically increase and quite a few healthy people will drop coverage as it is no longer functionally affordable. The only people who would stick would be the very sick and very expensive.
Wait, it gets’ worse:
@joshschultzdc There wouldn't be any other plans to apply APTCs to anyway. Silver (& gold) plans are obligatory for Exchange participation.
— Ken Kelly (@_KJKelly) January 9, 2017
Carriers have to offer Silver plans to participate on Exchange. If they yank all of their Silvers, they have to yank everything on Exchange.
And carriers will flee if CSR disappears as they will not eat a 30% revenue loss for a high cost population in a market that they don’t know if it will be around long enough to actually make money on.