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Health insurance industry decries decision to end cost-sharing subsidies

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Health insurance industry decries decision to end cost-sharing subsidies

The White House's decision to axe cost-sharing reduction payments to health insurers offering plans on Affordable Care Act state exchanges has drawn the ire of industry groups and companies, which said the payments are critical to keeping premiums low for consumers.

The payments to insurers are meant to help cover low-income or high-risk consumers. The administration of President Donald Trump has been deciding month to month whether cost-sharing reductions should be paid to insurers.

The move sent shares of managed care companies with high participation on the state exchanges tumbling. The threat of halted CSR payments has already been built into the premiums of 2018 plans to keep them profitable, Chris Sloan, senior manager at research firm Avalere Health, said in an interview. But for the rest of 2017, they are going to realize a loss.

"For 2017, health plans are going to eat this loss, because [insurers] can't raise rates mid-year," Sloan said.

Sloan said the timing of the administration's decision is "interesting" because it was nestled between the final deadline for insurers to file rates and Nov. 1, when open enrollment begins.

The risk the administration took in dropping payments, Sloan said, is that insurers are likely to drop out of states that did not factor in CSR losses.

"What we know for sure is that a health plan that did not price in CSRs going away in 2018 and is not given the opportunity to resubmit rates ... should drop out," Sloan said. "They are going to bear the full financial burden of this and are going to lose that money."

In August, insurers in at least 14 states filed double rate requests: One that assumed CSR funding and one that assumed the funding would be stopped.

In Georgia, Anthem Inc. unit Blue Cross & Blue Shield of Georgia Inc. filed an average rate increase of 57.5% if CSRs went unpaid. As a result of the uncertainty, Anthem has been whittling its offerings in states in an effort to stay profitable.

Molina Healthcare Inc. said in an emailed statement to S&P Global Market Intelligence that not funding CSRs will have a "negative impact" on 7 million consumers enrolled on state exchanges as higher premiums will kick into effect.

"Years of practical experience and research have demonstrated that the absence of cost-sharing reductions forces low-income people to forego needed care and ultimately results in higher costs and worse health outcomes," the company wrote.

The company also noted that it will continue to participate in the seven states where it is currently offering marketplace plans. But, the company warned, it will "continue to evaluate our participation on a market-by-market basis."

The decision drew severe criticism from National Association of Insurance Commissioners CEO Mike Consedine, who said in a statement that state regulators are "very disappointed" in the decision, which will cause "further disruption of already volatile markets."

Consedine wrote that cancelling the payment cuts more than $1 billion owed to insurers in 2017.

Health insurance industry organization America's Health Insurance Plans, in conjunction with Blue Cross Blue Shield Association, also fired warning shots at the White House in a statement, saying that terminating the "critical" program destabilizes the market.

The organizations maintained that CSRs are not "bail outs" for insurance companies but rather a funding mechanism to bring down the cost of healthcare for consumers.

"We need constructive solutions that increase consumer choice, lower consumer costs, and stabilize local markets," the organizations wrote. "This action will make it harder for patients to access the care they need. Costs will go up and choices will be restricted."

Anthem, Centene Corp. and Humana Inc. are among dozens of insurers that are members of the group.

In the same vein, Blue Shield of California Vice President for Government Affairs Gary Cohen called on Congress to "take immediate action" to fund CSRs. The company is an independent member of the Blue Cross Blue Shield Association with 4 million members statewide.

Sens. Lamar Alexander, R-Tenn., and Patty Murray, D-Wash., are working on a bill to stabilize markets temporarily.

Alexander, chairman of the Senate Health, Education, Labor and Pension Committee, hosted four high-profile hearings in early September to produce a bill that would fund CSRs for a limited amount of time, among other items designed to bring premiums down.