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CBO: Withholding ACA Subsidies Would Send Premiums Soaring

17 August 2017, 07:33 | Mandy Simon

CBO: Withholding ACA Subsidies Would Send Premiums Soaring

CBO: Withholding ACA Subsidies Would Send Premiums Soaring

Ending cost-sharing reduction payments could cause insurers to abandon the individual market in counties that contain 5% of the US population, according to a new projection from the Congressional Budget Office. Under Obamacare, insurance companies are required to reduce out-of-pocket costs like co-pays and deductibles for low-income customers who buy silver plans through the law's online exchanges. And that's taking into account the $118 billion the government would save from not having to make the CSR payments themselves.

"If the market does collapse, that's going to be a reflection of a choice the administration has made", Matthew Fiedler, a fellow at the Center for Health Policy at the Brookings Institute and former chief economist for Obama's Council of Economic Advisers, said in a July interview. After almost two years of deliberation, a federal district court concluded the House's claim had legal standing and allowed the case move forward in May, 2016.

The Obama administration appealed the ruling, allowing the payments to continue.

The Congressional Budget Office has issued a new report on the projected effects of terminating cost-sharing reduction subsidy payments under the Affordable Care Act, as President Trump has repeatedly threatened to do.

If these payments ended, some insurance companies would likely withdraw from Obamacare marketplaces. Trump tweeted out on July 29.

As worrisome as those projections appear, the CBO's assumption may underestimate the full impact of eliminating the subsidies, says Timothy Jost, a health care policy expert and emeritus professor at the Washington and Lee University School of Law.

Hundreds of USA counties are at risk of losing access to private health coverage in 2018 as health insurers consider pulling out of those markets in the coming months. "Silver plans differ from other plans because they must provide CSRs [cost-sharing reductions] to eligible enrollees: The actuarial value depends on the policyholder's income as a percentage of the FPL [federal poverty level for household income]". Nearly 6 million people qualified previous year. These payments are expected to total $7 billion this year. The insurers improve the plans with the payments. One of the reasons that United Healthcare's stock has been hitting a series of new all-time-highs this month is that the company is cutting its Obamacare coverage from 34 states in 2016 to 3 states in 2017, and possibly leaving Obamacare completely in 2018.

"Gross premiums for silver plans offered through the marketplaces would be 20 percent higher in 2018 and 25 percent higher by 2020-boosting the amount of premium tax credits according to the statutory formula", the congressional analysts said.

Moreover, it would increase the federal deficit by $194 billion over the first 10 years because the law would require a different federal fund to take its place. According to the CBO report, however, the market could remain stable without CSRs under certain conditions.

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