Effects of Alternative Insurer Responses to Discontinued Federal Cost-Sharing Reduction Payments: Broad Loading as an Alternative to Silver Loading
Jun 3, 2019
Earlier research established that the federal government would likely save money if federal cost-sharing-reduction (CSR) payments to insurers under the Affordable Care Act were restored, but total health insurance enrollment would decrease. The authors of this report analyze what would happen if federal lawmakers used the savings from restoring CSR payments to provide additional health insurance subsidies or to finance reinsurance.
Under the Affordable Care Act (ACA), insurers are required to offer subsidies that reduce cost-sharing for eligible exchange enrollees who have incomes below 250 percent of the federal poverty level (FPL) and are enrolled in silver-tiered exchange plans. Under the original implementation of the ACA, the federal government made payments to insurers to cover the costs of the cost-sharing reduction (CSR) subsidies. CSRs reduce consumers' out-of-pocket health care costs (premiums, deductibles, and coinsurance), thereby increasing the actuarial value of plans.
In late 2017, the Trump administration decided that federal payments of CSRs were unlawful and halted the federal payments. A new congressional appropriation would be needed to reinstate federal CSR funding under the current administration's policy. Insurers are still required to provide CSR subsidies to qualifying enrollees, despite the fact that the federal government is no longer making CSR payments to insurers. As a result, most states and insurers adopted a practice known as "silver loading" to fund CSRs.
Earlier research established that the federal government would likely save money if federal CSR payments to insurers were restored, but total health insurance enrollment — and, in particular, enrollment on the individual market — would decrease. The authors of this report analyze what would happen if federal lawmakers used the savings from restoring CSR payments to provide additional health insurance subsidies or to finance reinsurance. Additionally, they examine how these scenarios would affect premiums and out-of-pocket premium spending both in California and at the national level.
Changes in Premium Payments to Maintain Coverage