Options for Reinvesting Savings from Restored Federal Cost-Sharing Reduction Payments: Examining the Effects of Two Policy Alternatives on Spending and Enrollment in the Individual Health Insurance Market
Sep 10, 2019
Although the federal government is no longer making cost-sharing reduction (CSR) payments to insurers, insurers are still required to provide CSR subsidies to qualifying enrollees. As a result, to fund CSRs, most states and insurers have adopted a practice known as silver loading, in which only the premiums of silver-tiered individual market plans are increased. In this report, the authors address the effects of disallowing this practice.
Under the Affordable Care Act (ACA), insurers are required to offer cost-sharing reductions (CSRs) to eligible exchange enrollees who have incomes below 250 percent of the federal poverty level and are enrolled in silver-tiered exchange plans. CSRs reduce consumers' out-of-pocket health care costs (premiums, deductibles, and coinsurance), thereby increasing the actuarial value of plans. Under the original implementation of the ACA, the federal government made payments to insurers to cover the costs of CSRs. In late 2017, the Trump administration decided that federal payment of CSRs was unlawful and halted federal payments for CSR subsidies. A new congressional appropriation would be needed to reinstate federal CSR funding under this policy. Although the federal government is no longer making CSR payments to insurers, insurers are still required to provide CSR subsidies to qualifying enrollees. As a result, most states and insurers have adopted a practice known as silver loading to fund CSRs.
In this report, the authors address the effects of disallowing this practice, in which only the premiums of silver-tiered individual market plans are increased in response to halted federal payments of CSRs. They consider a scenario in which the costs of CSR subsidies must be spread among all metal-tiered individual market plans, a practice known as broad loading. They compare the silver loading, or status quo, scenario with the broad loading scenario to estimate the impacts on insurance enrollment, individual market premiums, and federal spending. In addition, they examine a scenario in which federal CSR payments are restored.