Eliminating federal subsidies would trigger payer exodus from ACA exchanges, survey shows

A decision by the Trump Administration to cease funding cost sharing reduction (CSR) payments would spark an exodus of insurers from the health exchanges set up under the Affordable Care Act (ACA) for Americans to purchase coverage, according to a new survey.

“The question of whether the Trump administration will continue funding cost sharing reduction (CSR) payments looms large over the market,” write Oliver Wyman Actuarial Consulting analysts Beth Fritchen and Kurt Giesa. “Survey responses indicate the administration’s decision will have a significant impact on 2018 rates and payers’ continued participation in the ACA exchanges.”

Specifically, the analysts say, “If CSR payments are halted, 42 percent of respondents said they would likely withdraw from the market. The other 58 percent indicated they would refile proposed rates, with the assumption being payers would adjust rates higher to cover the loss of the CSR payments.”

All of which would result in fewer people seeking treatment, people seeking treatment they can’t pay for, and more bad debt for providers.

Should the CSR payments be continued, the survey shows, 94 percent of respondents currently offering plans on the ACA exchanges said they intend to remain in that market, with only 6 percent indicating they planned to leave.

The deadline for insurers to file their premium rates is June 21, though some states may extend the deadline or allow insurers to submit two sets of rates. The Oliver Wyman Actuarial Consulting survey was conducted from May 16 to May 24.

CSR is designed to subsidize health coverage for low-income ACA enrollees by capping their out-of-pocket maximum for annual covered medical services. CSR payments from the federal government were $7 billion in fiscal 2016, and are expected to reach $10 billion in fiscal 2017.

That is, if they are allowed to continue. Earlier this month, Department of Health and Human Services Secretary Tom Price declined to say to the Senate Finance Committee whether the administration would continue CSR payments.

The survey also reveals that more insurers are planning significant rate hikes, with 43 percent of respondents saying they plan rate increases of at least 20 percent. Back in April, only 25 percent of insurers said they were considering such large rate hikes.

“Before the latest round of health reform, many had predicted that 2018 rate increases would be lower than in years past and that the market would begin to stabilize,” the analysts write. “Given the survey responses, it appears that the overall uncertainty of the market is impacting payers’ 2018 planning.”

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