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Insurers Face Tough Choices Thanks to Trump Decision to Kill Obamacare Subsidies

10/18/2017

Absent the success of a bipartisan solution now brewing in the Senate, President Donald J. Trump’s move to stop paying subsidies under the Affordable Care Act (ACA) would deal a heavy blow to insurers in states that failed to factor such losses into their 2018 Obamacare plans, writes Patrick J. Hurd, Partner in LeClairRyan’s Richmond office, in a new post on the national law firm’s LR Workplace Defender blog.

Prior to last week’s announcement, Trump’s saber rattling about the future of the so-called Cost-Sharing Reduction (CSR) payments had already triggered tremendous uncertainty among insurers, Hurd noted in the post. Indeed, this is precisely why many insurers went ahead and factored premium increases into their forthcoming ACA Marketplace plans.

“The insurance companies in these states will be unable to offset the costs of the ceased CSRs and face the choice of incurring substantial losses or withdrawing immediately from the Marketplace,” writes Hurd in the post, “Ceasing the CSR’s: Once a Threat, Now A Promise.”

Companies that gambled on the continuation of CSRs face difficult choices in days ahead, Hurd writes, as do individuals who will be looking to buy insurance on the ACA Marketplace when open enrollment begins on Nov. 1.

“Of course, these concerns could be alleviated if the short-term plan announced yesterday by Senators Lamar Alexander and Patty Murray gets ratified by both houses of Congress,” says Hurd. Among other things, the proposal calls for the CSR subsidies to be funded for two years, while providing states with more flexibility on the variety of plans offered to consumers.

“As designed, the Alexander-Murray plan would get insurers and consumers through the next two years, giving Congress the breathing room necessary to come up with a long-term solution to our nation’s healthcare insurance dilemma,” Hurd comments. “But there’s no guarantee of passage in the Senate or House, even though the President voiced support for the proposal.”

In the column posted last week Hurd delves into the history of the ACA Marketplace subsidies and describes the 2014 legal challenge against them (United States House of Representatives v. Burwell, 185 F. Supp. 3d 165 (D.D.C. 2016) No. 14-cv-01967-RMC).

He also explores the disruptive effects of ceasing the subsidies—in particular, earlier predictions and commentary on these impacts by the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT). In an August 2017 report, for example, these analysts presciently described the potential fallout of giving insurers the bad news about the payments after those insurers had already set their 2018 plans: “…if CSR payments were stopped after premiums were finalized or were already being charged,” the analysts wrote, “CBO and JCT expect that additional insurers would exit the marketplaces in 2018 to reduce their financial losses.”

And in fact, major healthcare companies are now weighing whether to pull out of what will be, for them, money-losing exchanges in 2018, Hurd says. The veteran healthcare attorney and others at the firm will continue to monitor the situation and write updates at LR Workplace Defender. “At the time of this writing, there appears to be some interest among some members of Congress in both parties to enact a temporary fix to avoid the disruption and attendant costs of ceasing the CSRs,” he notes in the post.

Moreover, attorneys general from 18 states and Washington D.C. have already asked the U.S. District Court for the Northern District of California to stop the administration from killing the payments on the grounds that ACA is still the law of the land, Hurd notes.

The full column is available at:
https://lrworkplacedefender.com/ceasing-the-csrs-once-a-threat-now-a-promise/