Whether or not the federal government continues to pay the cost sharing subsidies for health insurance premiums under the ACA is causing consternation in the health insurance industry- big time. That’s because the President has implied that he may direct the Executive Branch to stop paying the subsidies... and the subsidies are a big factor in setting premium rates.
Cost-sharing subsidies are paid directly to insurers by the fed's to help cover out-of-pocket costs like deductibles and copayments for people that earn between 100 and 250% of the federal poverty level who buy a marketplace “silver plan”. A Congressional Budget Office analysis published this week found that if the federal government stops paying the subsidies, the price for “silver plans” on the Marketplace would go up by an average of 20% next year.
Interestingly, stopping the payments would also increase the federal budget deficit. How could that be?
People earning up to 400% of the poverty level qualify for advance premium tax credits, which are different from the cost sharing subsidies. Because health insurance premiums would increase by an average of 20% without the cost sharing subsidies, the federal government would be responsible for paying out more in advance premium tax credits because the premiums will be higher than they would have been had they continued the subsidies.
The CBO report found that the net result would be a $194 billion increase in the federal budget deficit over the next decade.
8/17/17 Update: A White House Spokesperson is reported to have said yesterday that HHS will make the CSR payments in August, but declined to state whether future months' CSR will be distributed.