With all of the debate and squabbling about health care costs, there has been a general recognition that individuals who don’t qualify for a subsidy under the ACA have been hard hit by premium increases over the past years. In fact, CMS data released earlier this year indicated that non-subsidized enrollees saw a 20 percent decline in enrollment while subsidized enrollees declined by three (3) percent. Premium increases were considered to be a major factor accounting for the drop in enrollment.
In an effort to make coverage more affordable for individuals who pay the full price of coverage, CMS is encouraging states to take action. CMS issued a recent letter encouraging states to allow individual market plans that are not on the exchange to price their plans without “the silver load” for CSRs. The letter also encourages state where a load was placed on all exchange plans due to CSRs to also offer unloaded plans.
A bit of background explains what the letter is referencing by “the silver load.”
The Affordable Care Act (ACA) categorizes health insurance by “metal” levels ranging from bronze to platinum. There is also a catastrophic plan. Silver plans are the level used to determine premium assistance such as advanced premium tax credits (APTC) and cost-sharing reductions (CSRs).
CSRs were intended to make coverage more affordable. HealthCare.gov defines CSR as “a discount that lowers the amount you have to pay for deductibles, copayments, and coinsurance.” Depending on income, a person enrolling in coverage could qualify for the extra help provided by CSRs.
But, questions arose regarding the CSR payments. At issue was that funds for CSRs were not appropriated by Congress. Lawsuits and political rhetoric ensued. As a result, CSR payments from the federal government were stopped in 2017.
Without federal funds to make up the extra CSR amounts, premiums would have to increase as the ACA required that insurance plans sold on the marketplace include CSR payments. A number of state regulators calculated that since CSRs were applicable for silver plans, any increase due to the lack of federal funding for CSRs should only be “loaded” in premiums for those plans. And, much of the increase would be offset by commensurate increases in APTCs.
This was a workable solution for marketplace buyers. Individuals who didn’t qualify for a subsidy or those who purchased coverage outside of the marketplace didn’t fare as well. These unsubsidized buyers experienced larger than expected premium increases.
And, that’s where the CMS letter comes into play. The ACA requires that plans have the same cost on and off the exchange. The letter encourages states to allow issuers to “offer and market plans that are available exclusively off-Exchange that do not include the CSR load that are “similar, but not identical” to a plan on the exchange.
Whether states will embrace this flexibility and whether insurers will file plans to take advantage of it remains to be seen.