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Federal policy on cost-sharing reduction payments, 2017

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The Affordable Care Act (ACA), commonly known as Obamacare, requires insurers to reduce the portion of the cost of health services low-income individuals must pay, known as cost-sharing reductions. The federal government then would reimburse insurers for these discounts. In 2014, the House of Representatives sued the Obama administration, saying it issued these payments without an express appropriation from Congress. A district court found in favor of the House in 2016 but placed the suit on hold.

After President Donald Trump was inaugurated, his administration took responsibility for defending the cost-sharing reimbursements in court, leading to uncertainty regarding their future, given the possibility the administration could drop the lawsuit. On October 13, 2017, the Trump administration submitted a filing to the U.S. Court of Appeals for the D.C. Circuit stating that the Department of Health and Human Services would cease the cost-sharing reimbursements immediately. Up until this point, the Trump administration had been deciding whether to make the payments on a month-by-month basis.[1][2]

This page tracked major events and policy positions of the Trump administration and the 115th United States Congress on cost-sharing reduction payments in 2017. This page was updated through November 2017. Think something is missing? Please email us at editor@ballotpedia.org.

What are cost-sharing reductions?

The Affordable Care Act (ACA) required insurers participating in the health insurance exchanges to offer low-income consumers reductions in their cost-sharing burden. Cost sharing refers to the division of payments for healthcare services between insurers and the individuals they cover. Premiums, copayments, and deductibles are all forms of cost sharing. Under the ACA, individuals earning between 100 percent and 250 percent of the federal poverty level are eligible for a reduction in their share of these costs, paying as little as 6 percent of a plan's costs, compared to 30 percent under a standard silver-level plan.[3]

The law intended to reimburse insurers for these reductions in cost-sharing. The reimbursements were estimated to total $7.35 billion in 2017. However, the reimbursements were the center of a lawsuit initiated by the House of Representatives in 2014 that alleged the executive branch had been making the payments without an express appropriation from Congress, in violation of the Constitution.[4]

What action on the reimbursements has the Trump administration taken?

On October 13, 2017, the Trump administration submitted a filing to the U.S. Court of Appeals for the D.C. Circuit stating that the Department of Health and Human Services was ceasing ACA cost-sharing subsidies immediately. The administration stated that it would not make the next payments scheduled for October 18, stating that the payments were not formally appropriated by Congress and are therefore illegal. Under the Affordable Care Act, insurers who offer plans on the exchanges are required to provide the reductions, even without the reimbursements from the federal government.[2]

When Trump was inaugurated, his administration took responsibility for defending the reimbursements in the lawsuit filed by the House. That lawsuit was put on hold in November 2016, in anticipation of new healthcare policies developed by Congress and the administration. Up until this point, the Trump administration had been deciding whether to pay the cost-sharing reduction reimbursements on a month-by-month basis.[5]

What happens next?

Legislative options

Congress could expressly appropriate funding for the reimbursements in a budget bill or in a bill to repeal, modify, or replace the Affordable Care Act. Such an action would make moot the House's lawsuit against the administration. In the four major attempts to pass a healthcare bill in 2017, cost-sharing reimbursements would have been addressed in the following ways:[6][7]

The cost-sharing reduction reimbursements were also included in April 2017 negotiations over the budget bill to fund government operations through the remainder of the calendar year. The Los Angeles Times reported that insurance industry leaders urged Congress to include the reimbursements in the bill. The payments were not included in the bill. The administration did commit to funding the payments in the short term but did not make a long-term commitment.[1][8]

On May 17, 2017, the National Association of Insurance Commissioners, a membership organization representing the chief insurance commissioners of the 50 states, wrote a letter to Office of Management and Budget Director Mick Mulvaney asking the Trump administration to continue funding the cost-sharing reduction reimbursements through 2017:

“ Your action is critical to the viability and stability of the individual health insurance markets in a significant number of states across the country. ... The one concern carriers consistently raise as they consider whether to participate and how much to charge in 2018 is the uncertainty surrounding the federal cost-sharing reduction payments.[9] ”
—National Association of Insurance Commissioners[10]

The organization sent a similar letter to Republican and Democratic Senate leadership, asking them to legislatively appropriate funding for the reimbursements and to provide additional funding to states in order to establish reinsurance programs and high-risk pools.[11]

Judicial options

House lawsuit to stop payments

The House's lawsuit against the executive branch for issuing the payments was put on hold, or granted an abeyance, by the U.S. Court of Appeals for the D.C. Circuit in November 2016 to allow for new policies to be enacted by the Trump administration.[12]

On May 18, 2017, Democratic attorneys general from 15 states and the District of Columbia submitted a motion to intervene in the case. On August 1, 2017, a three-judge panel of the United States Court of Appeals for the District of Columbia Circuit granted the motion, meaning they may continue to defend the lawsuit. The court ruled that the states had standing to intervene because the they had demonstrated that they would suffer a concrete injury if the payments were denied. The court also found that the states raised sufficient doubt about the government's representation of their interests. The order further stated,[13][14][15]

“

The States have shown a substantial risk that an injunction requiring termination of the payments at issue here—which is the relief sought, and obtained in the district court, by the House of Representatives—would lead directly and imminently to an increase in insurance prices, which in turn will increase the number of uninsured individuals for whom the States will have to provide health care. In addition, state-funded hospitals will suffer financially when they are unable to recoup costs from uninsured, indigent patients for whom federal law requires them to provide medical care. ... That causal linkage is plausible, directly foreseeable, imminent upon the grant of the House’s requested relief, and adequately supported by the affidavits and supporting documents the States have filed.[9]

”

If the case moves forward, which is more likely now that the states may intervene, the court could ultimately uphold or overturn the ruling of the district court that found the cost-sharing reduction payments were made in violation of the Constitution. Upholding that ruling would require that the reimbursements end immediately, unless the ruling is stayed to allow for an appeal to the United States Supreme Court. If the ruling is overturned, the reimbursements could continue to be paid.

State attorneys general lawsuit to continue payments

Additionally, 19 Democratic state attorneys general from filed a lawsuit against the Trump administration on October 13, 2017, seeking a preliminary injunction to stop the administration from ending the payments. Eric Schneiderman (D), attorney general for New York, stated that the purpose of the new lawsuit was to seek immediate relief from the administration's decision and that he anticipated also proceeding in the original suit filed by the House. The 19 attorneys general requesting the preliminary injunction include the following:[16][17]

  • California
  • Kentucky
  • Massachusetts
  • Connecticut
  • Delaware
  • Maryland
  • Oregon
  • North Carolina
  • Illinois
  • New York
  • Vermont
  • Pennsylvania
  • Rhode Island
  • Virginia
  • Minnesota
  • New Mexico
  • Washington
  • Iowa
  • Washington, D.C.

On October 25, 2017, U.S. District Court Judge Vince Girdhari Chhabria denied the request from the attorneys general for a preliminary injunction, stating that the Trump administration's legal argument for ending the payments was stronger and that ordering the administration to continue the payments would be counterproductive. Chhabria wrote:[18]

“ If there was no permanent appropriation in the (Affordable Care) Act, Congress is to blame for the failure, because it has not been making annual appropriations for CSR payments. The administration cannot fix Congress's error, because the Constitution prevents the administration from making payments on its own.[9] ”
—Vince Chhabria

Chhabria also stated that "the absence of money for CSR payments does not seem to be causing healthcare reform to come crumbling down" because states prepared ahead of time for the payments to end.[18]

How has the issue impacted insurers?

On October 13, 2017, the insurance industry association America's Health Insurance Plans issued a statement that said, "Terminating this critical program will ... make it harder for patients to access the care they need. Costs will go up and choices will be restricted." Earlier in the year, insurers had said that the consequences of ending the cost-sharing reduction reimbursements would be that insurers would either raise their premiums to cover the cost of the reductions or decide to discontinue participation in the health insurance exchanges.[19]

While the administration was making decisions on the reimbursements month-to-month, insurers and industry leaders said that the uncertainty surrounding the cost-sharing reduction reimbursements and the lawsuit had impeded their ability to make decisions for 2018. On April 12, 2017, America's Health Insurance Plans, a trade association representing private health plans, wrote a letter to the Trump administration and to Congress. The letter stated that if the reimbursements were not guaranteed, some plans would leave the market while others would raise their premiums.[20]

The following insurers and state regulators made statements regarding the cost-sharing reduction reimbursements:

  • On May 25, 2017, Blue Cross Blue Shield of North Carolina filed its 2018 rate request with North Carolina's insurance commissioner, asking for a 23 percent increase. The insurer specifically stated that were it not for the uncertainty regarding cost-sharing reimbursements, its rate increase request would have been 8.8 percent.[21]
  • In June 2017, insurers in Pennsylvania requested an average rate increase of 8.8 percent for individual plans and 6.6 percent for small group plans. These rates were not final, and the state's insurance regulators said the rate increases would be 23.3 percent on average if the individual mandate was repealed and 20.3 percent if cost-sharing reduction reimbursements were not paid. If both provisions were repealed, the rate increase would be 36.3 percent.[22]
  • On August 1, 2017, California's insurance exchange announced that premiums for plans offered on the exchange would rise by an average of 12.5 percent in 2018. The executive director of the exchange stated that if the cost-sharing reimbursements were not clearly funded by the end of August, premiums would rise by another 12.4 percent.[23]

What's the background on the House's lawsuit?

See also: Boehner's lawsuit against the Obama administration

In 2014, then-Speaker of the House John Boehner (R-Ohio) announced a lawsuit focusing on President Obama's failure to enforce the employer mandate as written in the ACA. Boehner claimed that the president "changed the healthcare law without a vote of Congress, effectively creating his own law by literally waiving the employer mandate and the penalties for failing to comply with it."[24] The case would also focus on the executive branch's payments to insurance companies, totaling about $3 billion dollars in 2014, without express appropriation by Congress.[25]

On July 30, 2014, the House voted 225 to 201 in favor of a resolution to file the lawsuit.[26] The case was filed as U.S. House of Representatives v. Burwell on November 21, 2014.[27] In September 2015, the United States District Court for the District of Columbia ruled that the House could proceed with its lawsuit challenging the use of unappropriated funds for new healthcare subsidies; however, the House could not sue the executive branch for delaying implementation of the employer mandate.[28] In May 2016, the same district court ruled that the executive branch could not use unappropriated funds to subsidize insurance companies.[29] The ruling was stayed to allow for appeal.

On July 6, 2016, The Obama administration appealed the district court decision to the U.S. Court of Appeals for the D.C. Circuit. On November 21, 2016, the House filed a request with the court of appeals to suspend further proceedings in the case, pending new policies enacted by the Trump administration. Following President Donald Trump's inauguration, his administration took responsibility for defending the cost-sharing payments in court, leading to uncertainty regarding their future.[30]

Congressional Budget Office report

On August 15, 2017, the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) released a report estimating the impact that ending the cost-sharing reduction (CSR) reimbursements would have on the individual market. The report was undertaken at the request of House Minority Leader Nancy Pelosi (D-Calif.) and House Minority Whip Steny Hoyer (D-Md.). The report analyzed what would happen if the reimbursements ended on January 1, 2018. Key findings included the following:[31]

  • Market stability: The report found that due to uncertainty over the financial impact of ending the payments, insurers in some states would decide not to sell plans on the health insurance exchanges. This would result in 5 percent of the population living in an area in which no insurers offered plans on the exchanges in 2018.
    • CBO and JCT estimated that by 2020, more insurers would choose to participate as more information about the policy's impact was known, and nearly all consumers would have access to a health plan in the individual market.
  • Effects on premiums: The report estimated that premiums for silver-level plans, which are the only plans consumers can buy and receive cost-sharing reductions, would be 20 percent higher in 2018 and 25 percent higher in 2020 than if the reimbursements continued.
    • Premiums for other types of plans would be a few percent higher due to uncertainty from insurers and regulators about how to respond to the new policy. The report did not estimate a specific percentage by which these premiums would rise.
  • Federal budget: The report estimated that the federal deficit would rise by $194 billion between 2017 and 2026 due to increases in payments for tax credits triggered by higher premiums.
    • The elimination of the cost-sharing reduction reimbursements would offset the increase in tax credits for individuals earning incomes between 100 and 200 percent of the poverty level. However, according to the report, "increases in premium tax credits for those with income between 200 percent and 400 percent of the FPL would substantially exceed the small reductions in CSR payments for this group."
  • Health insurance coverage: The report estimated that a slightly higher number of individuals would be uninsured in 2018. A slightly lower number would be uninsured in 2020 and thereafter.

Trump administration officials on cost-sharing reduction payments

Donald Trump

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  • On April 26, 2017, Politico reported that the White House had committed to continue paying the cost-sharing reimbursements in the short term to avoid a government shutdown. A White House aide later stated, "We haven't made a final decision about future commitments."[1][32]
  • In an April 2017 interview with The Wall Street Journal, President Trump said, "Obamacare is dead next month if it doesn't get that money," referring to the cost-sharing reduction reimbursements. "I haven't made my viewpoint clear yet. I don't want people to get hurt....What I think should happen and will happen is the Democrats will start calling me and negotiating."[33]
    • In response, Minority Leader Chuck Schumer (D-N.Y.) said that Trump was "threatening to hold hostage health care for millions of Americans…to achieve a political goal of repeal that would take health care away from millions more. This cynical strategy will fail."[33]

Department of Health and Human Services

  • On May 22, 2017, following the House's first 90-day status update, Department of Health and Human Services spokeswoman Alleigh Marre said, "Congress could resolve any uncertainty about the payments by passing the AHCA and reforming Obamacare's failed funding structure."[34]
  • On May 22, 2017, the Los Angeles Times reported that Centers for Medicare and Medicaid Services Administrator Seema Verma suggested to insurers that the administration would fund cost-sharing reductions in exchange for industry support of a bill to repeal the Affordable Care Act. A spokeswoman for the agency later stated, "The assertion that Administrator Verma offered to fund the CSR in exchange for support for legislation is preposterous ... What she said at the ... meeting in April was that no decisions had been made about CSRs."[35]
  • On April 10, 2017, when asked by The New York Times to clarify its position on the cost-sharing reduction reimbursements, the U.S. Department of Health and Human Services issued a statement saying, "The precedent is that while the lawsuit is being litigated, the cost-sharing subsidies will be funded. It would be fair for you to report that there has been no policy change in the current administration."[36]
  • During testimony before the House Appropriations Committee on March 29, 2017, Tom Price responded to questioning about the cost-sharing reimbursements by saying that as secretary of health and human services, he was now a defendant in the lawsuit and could not comment.[37]

Republican congressmen on cost-sharing reduction payments

  • Kevin Brady (R-Texas): "We should act within our constitutional authority now to temporarily and legally fund [subsidy] payments as we move away from Obamacare. ... Insurers have made clear the lack of certainty is causing 2018 proposed premiums to rise significantly."[38]
  • Rand Paul (R-Ky.): "The BCRA's payment of Obamacare’s cost-sharing reductions, as well as its stability funds, would provide another $136 billion in funding to pay insurance companies to participate in these markets. I urge you to reconsider this insurance company bailout," Senator Paul wrote in a June 28 letter to President Trump and Senate Majority Leader Mitch McConnell.[39]
  • Tom Cole (R-Okla.): In an April interview, Rep. Cole said, "I don't think anybody wants to disrupt the markets more than they already are. ... It's a very unstable market." When asked directly if Congress should appropriate the money for the cost-sharing directions, Cole said, "My personal opinion is yes."[40]
  • Greg Walden (R-Ore.): The New York Times reported that in March, Rep. Walden made the following statements about the payments: "Mr. Walden said last month, 'I will do everything I can to make sure that the cost-sharing reduction payments get made.' That, he said, is 'an obligation we have not only to the insurers,' but also to consumers, and 'we cannot leave them high and dry.'"[40]

See also

Footnotes

  1. ↑ 1.0 1.1 1.2 Politico, "White House to continue Obamacare payments, removing shutdown threat," April 26, 2017
  2. ↑ 2.0 2.1 The Washington Post, "White House’s decision to stop ACA cost-sharing subsidies triggers strong opposition," October 13, 2017
  3. ↑ Kaiser Family Foundation, "Impact of Cost Sharing Reductions on Deductibles and Out-Of-Pocket Limits," March 22, 2017
  4. ↑ Bloomberg, "Delay on Obamacare Subsidy Decision Leaves Insurers in Limbo," May 22, 2017
  5. ↑ The Hill, "Trump to make ObamaCare payments for September," September 19, 2017
  6. ↑ U.S. Government Publishing Office, "H. R. 1628 - The American Health Care Act," accessed May 29, 2017
  7. ↑ Modern Healthcare, "Senate health panel to craft insurance stabilization bill," August 1, 2017
  8. ↑ The Los Angeles Times, "Obamacare 101 — What's the big debate over health insurance cost-sharing subsidies?" April 26, 2017
  9. ↑ 9.0 9.1 9.2 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
  10. ↑ National Association of Insurance Commissioners, "Letter to OMB on Cost-Sharing Reductions," May 17, 2017
  11. ↑ National Association of Insurance Commissioners, "Letter to Senate Leadership on Cost-Sharing Reductions," May 17, 2017
  12. ↑ United States Court of Appeals for the District of Columbia Circuit, "House of Representatives v. Price - Joint Status Report," May 22, 2017
  13. ↑ U.S. Court of Appeals for the District of Columbia Circuit, U.S. House of Representatives v. Price, Secretary of H.H.S., et al. - Order, August 1, 2017
  14. ↑ United States Court of Appeals for the District of Columbia Circuit, "House of Representatives v. Price - Motion to Intervene," May 18, 2017
  15. ↑ The Incidental Economist, "Taking the Nuclear Option Off the Table," May 22, 2017
  16. ↑ The Hill, "18 states sue over Trump-halted ObamaCare payments," October 13, 2017
  17. ↑ Xavier Becerra, Attorney General, "Attorney General Becerra To File Lawsuit Today To Defend Americans' Health Care Against Trump’s Sabotage," October 13, 2017
  18. ↑ 18.0 18.1 Modern Healthcare, "Federal judge allows Trump to end cost-sharing subsidies," October 25, 2017
  19. ↑ America's Health Insurance Plans, "Health Plans Issue Joint Statement Regarding Funding for Cost-Sharing Reduction Benefits for Millions of Americans," October 13, 2017
  20. ↑ America's Health Insurance Plans, "Joint CSR Letter to President Trump," April 21, 2017
  21. ↑ Axios, "Blue Cross wants 23% rate hike in NC, blames uncertainty on insurer payments," May 25, 2017
  22. ↑ Modern Healthcare, "Pennsylvania insurers buck trend for giant rate hikes with single-digit bump request," June 1, 2017
  23. ↑ Modern Healthcare, "Trump's threats to end cost-sharing subsidies could lead to premium hikes and litigation," August 1, 2017
  24. ↑ Los Angeles Times, "House lawsuit over Obamacare to focus on employer mandate delay," July 10, 2014
  25. ↑ U.S. House of Representatives, "U.S. House of Representatives v. Burwell," November 21, 2014
  26. ↑ New York Times, "House Votes to Sue Obama for Overstepping Powers," July 30, 2014
  27. ↑ U.S. House of Representatives, "U.S. House of Representatives v. Burwell," November 21, 2014
  28. ↑ Washington Post, "House GOP can pursue part of healthcare lawsuit, judge rules," September 10 ,2015
  29. ↑ Washington Post, "House of Representatives Prevails In Obamacare Suit," May 12, 2016
  30. ↑ Court Listener, "United States House of Representatives v. Burwell," accessed May 22, 2017
  31. ↑ Congressional Budget Office, "The Effects of Terminating Payments for Cost-Sharing Reductions," accessed August 15, 2017
  32. ↑ Morning Consult, "Trump Administration Says It Will Continue Insurer Payments, for Now," April 26, 2017
  33. ↑ 33.0 33.1 The Wall Street Journal, "Trump Threatens to Withhold Payments to Insurers to Press Democrats on Health Bill," April 12, 2017
  34. ↑ CNN, "Trump, Congress punt again on critical Obamacare subsidies," May 22, 2017
  35. ↑ Los Angeles Times, "Health insurers plan big Obamacare rate hikes — and they blame Trump," May 22, 2017
  36. ↑ The New York Times, "Trump Administration to Pay Health Law Subsidies Disputed by House," April 10, 2017
  37. ↑ The Washington Post, "Trump administration still plans to undo parts of the ACA, Tom Price testifies," March 29, 2017
  38. ↑ Modern Healthcare, "Top Republican seeks action now to steady insurance markets," June 8, 2017
  39. ↑ Rand Paul, "Dr. Rand Paul Outlines Proposals for Revising Senate Health Care Bill," June 28, 2017
  40. ↑ 40.0 40.1 The New York Times, "Trump Administration to Pay Health Law Subsidies Disputed by House," April 10, 2017
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