Cost Sharing Reduction (CSR) subsidies are the 2017 Sword of Damocles. Insurers have to provide an actuarial value bump to low income on-Exchange buyers but they don’t know if the Federal government will pay for the bump. Their current contracts with the Center for Medicare and Medicaid Services (CMS) allows carriers to withdraw from the Exchanges mid-year if allowed by state law if CSR is not paid. This is the Samson option for Trump.
Yesterday’s post looked at the dynamics of how insurers want to price for 2018. They can either assume the government will pay CSR or not pay. There are probabilities as to what could happen but the actuarial assumptions collapse to two poles.
This is interesting information:
In other news, Trump reiterates threat to sabotage ACA by w/holding $ owed to insurers if he “stop[s] wanting to pay” them (which he "will") pic.twitter.com/iauunCul1z
— Aviva Aron-Dine (@AvivaAronDine) May 11, 2017
Sure looks like it would be gross negligence for any insurer to assume that the government will pay CSR subsidies in 2018 rate filings. And until there is black letter law making CSR an appropriated and ideally a mandatory expenditure, insurers will have to assume that they could and will disappear at any time and thus price accordingly.
Cermet
And so, as I warned – it begins. Cost increases will end the ACA’s accomplishments sooner than later even if the Senate does not kill it.
artem1s
Let him threaten. That’s really going to go over well at the town halls. He will take the GOP down with him before he goes. He is the scorpion, it’s his nature.
rikyrah
you said May 22nd is Shyt Gets Real Day…right?
Shalimar
The problem for Trump isn’t that no one believes his threat. Everyone believes he will do it at some point. The problem is that no one believes he will adhere to any bargain they make with him to save the payments.
Citizen_X
How many republican senators are willing to lash themselves to Trump today anyway? Especially over an issue that already has people up in arms.
Dropping subsidies will have immediate bad effects, and disabled and sick people would end up jamming senators’ offices right away.
David Anderson
@rikyrah: Around then —- CMS submissions are due no later than the end of June and actuaries need time with stable assumptions to run their models and write things up.
The shit gets real time is a six week window (Virginia and Maryland shit got real in mid-April)
Julie
At this point, I am just hoping that the CSR payments continue until the end of THIS year. David, do you have any thoughts about Molina CEO Mario Molina’s letter to Congress last month, stating that “If the CSR is not funded, we will have no choice but to send a notice of default informing the government that we are dropping our contracts for their failure to pay premiums and seek to withdraw from the marketplace immediately”. Can they drop out any time during the year, not just mid-year? Also, you suggest that it depends on state law, so can they drop out in all states? Do you think this is a serious threat? Of course Mario Molina has since been fired, ostensibly due to the company losing money. As a current Molina Marketplace customer, I am one of those people with spiking blood pressure these days.
David Anderson
@Julie: The current contract between insurers and CMS says that if CSR payments are not made on time and in full, insurers have the right to terminate their products mid-year without CMS having recourse. This is what Molina is referencing. The plans still have to comply with state law. Some states have immediate termination laws, others require 30-90 day termination notices, others won’t allow mid-year termination for any other reason than bankruptcy. So it will depend on the state law.
quakerinabasement
When those sharp premium hikes roll out, I hope the companies explicitly point to uncertainty about CSRs.