I don’t know how you all reacted to news of President Trump’s executive order eliminating cost-sharing reduction payments, but I know what I did: went on to CoveredCa.com
to re-up my insurance for next year before all hell breaks loose.
I was therefore reassured to receive this email from Covered California yesterday afternoon. It explains what the actual effects of the order will be on consumers in California, and probably in some other states as well. All of which makes what Trump did – in the short term, anyway – seem a bit pointless.
We know there is confusion about last night’s decision by the federal government to stop select reimbursements to insurance companies. These reimbursements support subsidies for lower-income consumers known as Cost Sharing Reduction (CSR) payments.
Despite this action, Covered California members will not see any change in their health costs for the remainder of 2017 and the rates and out-of-pocket costs published by Covered California for 2018 will not be affected.
How can stopping the funding for CSR payments not affect insurance prices? It’s because this cut to one subsidy will trigger an automatic increase in other kinds of financial support.
The CSR payments to health insurance companies the federal government is eliminating are designed to help with out-of-pockets costs, like deductibles and co-pays.
These CSR payments don’t go directly to eligible Covered California members, instead health insurance companies lower the costs of some out-of-pocket expenses for eligible Californians, and then the insurers get reimbursed for that expense.
Even without CSR reimbursements, insurance companies are still required to help eligible Covered California members with their out-of-pocket costs. That’s a requirement of the Affordable Care Act and this requirement has not been halted.
The Affordable Care Act also includes another, larger type of subsidy that is specifically designed to reduce the cost of premiums, ensuring that family budgets are largely unaffected. That subsidy or premium assistance is called the Advance Premium Tax Credit (APTC).
The CSR payments that the federal government is eliminating only apply to certain silver plans. Covered California has already taken steps to minimize the impact of the loss of CSR funding and worked with insurers to price plans accordingly to ensure stability in 2018, adding a premium surcharge only to silver plans. Silver plans are the basis for the amount of premium assistance, APTC, consumers receive, so an increase in silver premium will be offset by an increase in APTC for most consumers.
Because the surcharge will only be applied to Silver-tier plans, nearly four out of five consumers will see their actual monthly premiums stay the same or decrease, since the amount of premium assistance they receive will also rise.
The effect of the federal government’s decision is something like this: Insurers get less money for helping low-income people with out-of-pocket costs on silver plans; premiums on silver plans increase more to compensate; and that forces the federal government to increase all APTC based subsidies to make sure people can still afford insurance.
So, the bottom line to get the best plan at the best price: SHOP and compare all plans offered by Covered California!!