The Current Battle over the ACA: Federal Cost-Sharing Reduction Payments

By Lehr Middlebrooks Vreeland & Thompson, P.C.

August 23, 2017

Despite increasing pressure from insurers, health professionals, patient advocate groups, and health care industry leaders during the month of July, the Senate Republicans made multiple attempts to pass some form of a health care bill that repealed some or all of the Affordable Care Act. Ultimately, the Senate Republicans and President Trump could not get enough Republican support for the bill in light of the significant problems it posed: increased premiums, diminished choices, lesscoverage, and a drastic increase in the number of uninsured Americans. Following the dramatic demise of the Senate GOP’s health care bill, the major concern among politicians, insurance companies, health professionals, and individuals is the status of the federal government’s promised cost-sharing reduction payments to insurers in the Affordable Care Act (“ACA”)’s marketplace.

Immediately after the Senate voted down the GOP health care bill, President Trump tweeted his support for the collapse of the ACA exchanges, where individuals can purchase health insurance: “As I said from the beginning, let Obamacare implode, then deal. Watch!” President Trump has threatened to defund the cost-sharing reduction payments, also known as subsidies, estimated to be around $7 billion this year, which the federal government has promised to insurers participating in the ACA marketplace. These payments help to reduce out-of-pocket costs for ACA customers. More specifically, these funds are given to insurers to reimburse them for giving discounted deductibles and copays to more low-income customers.

President Trump’s threats have come at a sensitive time when several insurance companies have announced their intentions to leave the marketplace exchanges in certain states due to the high costs. The Kaiser Family Foundation estimates that around 25,000 ACA customers in 38 states are facing the possibility of having no insurer offering any coverage in the marketplace exchanges next year. In light of the fact that the President could likely stop funding the subsidies through executive actions alone, there has been intense fear across party lines and throughout the healthcare industry.

In a rare bi-partisan effort, Democrats and Republicans have repeatedly asked President Trump to move forward with enforcing current individual and employee mandates, funding the cost-sharing arrangements, and avoiding a collapse of the ACA exchanges. In fact, 40 House Republicans and Democrats joined together to create a funding proposal for the federal subsidies.

Congressional concerns rose even higher in August when the Congressional Budget Office (“CBO”) released a report estimating the possible impact if President Trump defunded the ACA’s cost-sharing reductions. The CBO determined that if President Trump ceased these payments, insurers would leave the ACA marketplaces because of the “uncertainty about the effects of the policy  on average health care costs for people purchasing plans.” Insurers would pull out of ACA marketplace exchanges serving 5% of the population. This is a major increase from the current situation wherein only two counties in the country are without at least one ACA insurer. Additionally, the CBO further estimates that to account for their lost funding, insurers in the marketplace would increase premiums by 20% in 2018 and 25% in 2020.

Suffice it to say, the report was a serious blow to President Trump’s “implode” strategy, and it appears he got the message. The Trump administration recently announced it would continue to fund the ACA subsidies for the month of August. However, the administration spokesperson did not state whether the administration would provide funding after August. This move has prompted Senators to aggressively renew their efforts to craft a narrow bill of ACA “fixes” that will set aside funds for the subsidies, including scheduling bi-partisan committee hearings. These new efforts are already looking more promising than the last few attempts in light of the narrower, more bi-partisan approach.

That being said, over the past few months, the country has been on a roller-coaster of ups and downs wherein complete repeal of the ACA is likely and also seemingly dead. Some have labeled the repeal bill as a “zombie bill” that just cannot be killed. While it seems many people in Congress are ready to focus their efforts on other big goals, including tax reform, based on President Trump’s tweets, it is likely he will not give up the repeal fight, despite the bi-partisan efforts to keep the core of the ACA and fix its problems. The window for making any legislative changes to the ACA is narrowing. Once Congress comes back from its August recess, it will only have a few months to tackle the ACA and other top priorities before the 2018 mid-term elections take precedent. The next few months will likely be the “make it or break it” period on health care legislation.