(Bloomberg) – States regulators and health insurers are rushing to react to the latest move by the Trump administration to dismantle parts of the Affordable Care Act, less than three weeks before their citizens and customers start signing up for coverage.
President Donald Trump’s administration said this week it wouldn’t pay subsidies to insurers that are used to help lower-income people with medical costs. In response, some regulators say they’ll need to reconsider the rates health insurers can charge -- a move that could lead to sharp increases in states such as Colorado, Oregon and Maryland.
Insurers, meanwhile, may reconsider whether they’ll sell plans under the law -- raising the possibility that some parts of the country could be left with fewer plans competing for customers’ business.
In Maryland, CareFirst BlueCross BlueShield said it needs to boost rates by about 20 percent to make up for Trump cutting off the subsidies, which are known as cost-sharing reduction payments, or CSRs. Chief Executive Officer Chet Burrell said he’s hopeful regulators will let his health plan re-file 2018 rates.
“The federal government has not been a reliable partner,” Burrell told reporters Friday. “You cannot count on the promises that they make and the commitments that they make, and that has a huge effect on how carriers will evaluate whether they stay in this market over time.”
Making Adjustments
The U.S. Centers for Medicare and Medicaid Services said it will work with state regulators in states where filings don’t account for the end of the subsidies.
“CMS is working on a case-by-case basis with those states where regulators explicitly required insurers to assume CSR payments would be made,” Caitlin Oakley, a spokeswoman for the Department of Health and Human Services, said by email.
Molina Healthcare Inc. had planned to offer ACA plans in seven states next year. On Friday, the insurer said it’s moving forward but will “continue to evaluate our participation on a market-by-market basis.”
Anthem Inc. had a large presence in Obamacare before pulling back entirely or in part from 10 states ahead of next year, citing “continued uncertainty around the future of cost-sharing reduction subsidies.” The Indianapolis-based company declined to say Friday whether it would retreat further.
Many states had already allowed insurers to charge higher prices to make up for the risk that the CSR subsidies wouldn’t be paid. Others plan to do so in response to Trump’s latest action. Colorado said Friday it was letting insurers increase rates an extra 6 percent on average to make up for the end of the CSR payments.
“Cutting the CSRs is cruel and irresponsible,” said Marguerite Salazar, the state’s insurance commissioner. “It doesn’t help people and will actually hurt consumers.”
Rates Go Up
Oregon will require insurers to increase premiums on mid-level “silver” insurance plans by an additional 7.1 percent for next year. Other types of plans won’t be affected, according to a statement from the Oregon Department of Consumer & Business Services.
Michael Consedine, the CEO of the National Association of Insurance Commissioners, said ending the subsidy payments will cost insurers at least $1 billion this year alone. Next year, the policy will boost premiums 12 percent to 15 percent on average, he said in a statement.
“State regulators across the country are very disappointed,” he said.
Much of the cost of the higher rates will be carried by taxpayers, or higher-income people who continue to buy coverage through the Affordable Care Act. Lower-income people will face higher premiums charged by insurers to make up for the end of the payments, but will also get subsidies to pay those up-front costs. Because of how the various subsidies work, the Congressional Budget Office has estimated that not paying the CSRs is actually more expensive.
Sticking Around
Centene Corp., which is headquartered in St. Louis, has been expanding in Obamacare even as its rivals pull back. CEO Michael Neidorff said he’s still confident in his company’s expansion plans, and the insurer incorporated the end of cost-sharing subsidies into its 2018 rate filings.
The president’s move isn’t helpful for the insurance markets, Neidorff said. “This does not stabilize it, this does not reduce costs. It increases them,” he said.
Hospitals will face increased costs as well, said Kenneth Davis, CEO of New York’s Mount Sinai Health System. Patients without insurance, or who leave Obamacare to buy less comprehensive coverage, still show up and need care. Those patients can face large out-of-pocket costs.
“Here’s what happens: When people decide that they can’t afford their coverage, they just don’t pay,” Davis said. “Our CFO likes to say co-pays are no-pays. We’re not-for-profits; we don’t go after people. We wind up dropping those charges ultimately, and that’s a tremendous loss for us.”
