CHA News Article

Covered California Board Adopts CSR Contingency Plan

Last week, the Covered California board adopted a new policy to provide stability to the market and help reassure health insurance companies that have expressed concern about participating in 2018 in the face of continued uncertainty over the federal government’s funding of cost-sharing reduction (CSR) reimbursements. 

Earlier this year, the federal government committed to funding CSRs through May 2017, with no guarantee it will continue. In the absence of a clear and reliable policy from the federal government that it will provide CSR funding through 2018, Covered California’s board acted to place any rate increases caused by the uncertainty onto Silver plans. For advanced premium tax credit (APTC) recipients, the amount spent on premiums is a percentage of income based on the second lowest Silver plan in their service area, no matter how much the premium costs. If premiums go up as CSRs are built into the cost of the Silver qualified health plan, consumers should be insulated as the additional costs will be covered by APTCs. While Silver level consumers will see an increase in the gross cost of their premiums, they will also see an increase in the amount of financial assistance they receive, leaving their net payment virtually the same. In addition, Covered California will require plans to offer a separately rated, non-mirrored Silver plan off exchange that is nearly identical to the Covered California patient-centered benefit design. These plans would not include any premium increase connected to the lack of CSR reimbursements and should mitigate the impact of any rate increases on approximately 1 million unsubsidized consumers.

A previous Covered California analysis found the federal government would spend $4 billion more on funding the increased subsidies than it would on funding the CSR reimbursements in 2018 alone, and tens of billions of dollars would be added to the federal budget over 10 years. “There is no logic in the federal government not continuing the way it currently funds cost-sharing reductions,” Peter V. Lee, executive director of Covered California said. “Not only do they help low-income consumers afford health care, but they also save billions of dollars in federal taxpayer money.”

Full detail and board materials are available on the Covered California website.