State health benefit exchanges dodged a legislative bullet last week that would have eliminated advance premium tax credit (APTC) subsidies to help low and moderate income households purchase non-group coverage. The nation’s largest exchange, Covered California, estimated the tabled budget reconciliation bill replacing the subsidies with an age-based tax credit beginning in 2020 would on average amount to only 60 percent of that provided under the APTC subsidies. That would have made coverage for less affordable for many households and potentially led to a dramatic drop in enrollment qualified health plans sold on the exchanges, shrinking the non-group risk pool and reducing spread of risk.
The exchanges now face a more immediate threat that could significantly disrupt plan year 2018 and potentially current year enrollees: the loss of cost sharing reduction (CSR) subsidies for silver level plans sold on the exchanges. The subsidies are available to households earning between 100 and 250 percent of federal poverty levels. By reducing out of pocket costs for eligible households, the subsidies effectively increase the actuarial value of silver plans that cover on average 70 percent of medical care costs.
A U.S. District court ruling issued last May found the Obama administration acted unconstitutionally in funding the subsidies without an explicit appropriation by Congress. The decision was put on hold pending appeal, where it sits pending possible action to resolve the underlying fiscal issue by the Trump administration and Congress. Without federal funding for the CSR subsidies, health plan issuers participating in the exchanges would incur billions in losses, according to an analysis prepared earlier this month by The Commonwealth Fund. There is no requested appropriation to cover the CSR subsidies in the Trump administration’s 2018 budget blueprint. As last week’s failed attempt to advance the budget reconciliation legislation illustrates, the Trump administration and Congress are unlikely to achieve a rapid agreement resolving the litigation as they struggle to form a majority party governing coalition.
Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email