Politico reports that President Trump is itching to stop paying the Cost Sharing Reduction subsidies for on-Exchange policies bought by people with incomes between 100% to 250% Federal Poverty Line (FPL). This is a threat with a limited time frame.
President Donald Trump has told advisers he wants to end payments of key Obamacare subsidies, a move that could send the health law’s insurance markets into a tailspin, according to several sources familiar with the conversations.
Many advisers oppose the move because they worry it will backfire politically if people lose their insurance or see huge premium spikes and blame the White House, the sources said. Trump has said that the bold move could force Congressional Democrats to the table to negotiate an Obamacare replacement.
This is a time limited threat. It is obviously a time limited threat for insurers have been stating that they are usually filing with the assumption that CSR will be paid for 2018, they reserve the right to refile under a variety of assumptions and attribution methods if CSR goes for 2018.
More subtly, let’s imagine that CSR has been paid through November 30th. If they were not paid in December, the carriers would have to use their reserves to cover the expenses but insurers would not flee the market before the end of the policy year. They might be able to reprice their 2018 policies based on the lack of the regular, early notification of accounts payable that they get before the CSR money is actually transferred in mid-December. They would take a hit, but it would not be a show stopper.
Moving to payment through Halloween but no payment for November and December, most insurers would have sufficient reserves to eat the loss and re-adjust their prices for 2018 while their lawyers get warmed up. Moving back another month, thinly capitalized insurers will start being in trouble as they may be hitting a Premium Deficiency Reserve (PDR) event that threatens their Risk Based Capital (RBC). At that point, some state regulators would be forced to either shut down insurers or allow insurers to terminate the CSR policies immediately. Well capitalized insurers could survive longer and jack up their rates for 2018 with state support.
The CSR threat loses its ability to blow up the market by sometime in the fall.