On October 12, 2017, the Trump administration announced that they would stop funding the cost-sharing reduction (CSR) payments that the lowest income participants purchasing coverage in the Marketplace receive. These cost-sharing reduction payments are for participants who have a household income that does not exceed 250 % of the federal poverty level. The cost-sharing reduction payments help lower the cost of things like copays, deductibles, and out-of-pocket maximums for individuals who qualify and purchase a silver level plan on the Marketplace. These CSR payments are different from the more common premium tax credits. For example, the premium tax credits are for individuals and families with household incomes that do not exceed 400 % of the federal poverty level. Therefore, the termination of the CSR payments does not impact the availability of premium tax credits to those who qualify.
Some people qualify for both a premium tax credit and a cost-sharing reduction at the same time. Individuals with household incomes that do not exceed 250 % of the federal poverty level can receive both the CSR and the premium tax credit, thus lowering both their premiums and reducing their out-of-pocket medical expenses.
How will this impact North Carolinians?
This new development will not cause a sudden dramatic increase in rates in 2018. Blue Cross Blue Shield of North Carolina (BCBSNC) is the only carrier in all 100 counties and currently has around 502,000 individuals covered under individual Marketplace policies, according to Brian Tajlili of BCBSNC. BCSBNC correctly anticipated that these CSR payments would stop in 2018 and factored that into their rate filings with the NC Department of Insurance when they requested a 14.1 % average increase in August. Had they received assurance that the CSR payments would be made in 2018, BCBSNC would have filed for an 8.8% increase.
While there might not be any unexpected increases in 2018 in North Carolina, the same cannot be said for 2019. BCBSNC has already warned that they may be forced to leave the Marketplace if CSR payments are stopped permanently. If BCBSNC stays in the Marketplace and the CSR payments terminated permanently, then there could be a sharp rise in premiums. According to Timothy Jost, building the increased costs into the premiums of silver plans would be the most likely outcome. Ironically, this would increase the value of the premium tax credit and therefore increase the amount of money the federal government pays towards those premium tax credits. In this scenario, the increased premiums would hurt individuals with household incomes above 400 % of the federal poverty level who do not qualify for premium tax credits.
However, there are still many changes that can happen before the 2018 Marketplace open enrollment period begins on November 1, including consideration of a bipartisan piece of legislation designed to extend the CSR payment for two years.
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