Insurers factored in premium increases ranging from 7 percent to 38 percent exclusively in silver plans to absorb the financial impact of the loss of cost-sharing reduction payments from the federal government, a new Kaiser Family Foundation analysis finds.
The approach, used by insurers in many states, shields consumers from steep rate hikes, because tax credits defraying the cost of premiums rise dollar-for-dollar along with benchmark silver rates. Eighty-four percent of marketplace enrollees received premium tax credits in 2017.
The new analysis of 32 states and Washington, D.C., tracks data on premium increases that insurers directly attributed to the end of the payments, which reimburse insurers for providing marketplace health plans with reduced out-of-pocket costs for lower-income people. Following months of uncertainty, the Trump administration announced on Oct. 12 that the payments would be discontinued immediately, although insurers must still offer the subsidized coverage.
Insurers reported a variety of approaches to compensate for the loss. Many increased premiums for silver-level plans because cost-sharing reductions for low-income enrollees are only available on those plans in the marketplaces. Surcharges on silver plans attributed to the end of the cost-sharing payments range from 7.1 percent to 38 percent, the analysis finds.
Other insurers reported the average impact of the discontinued payment across all plans, whether the increases were applied to all plans or only to silver plans. In these cases, the surcharge ranges from 0.1 percent to 27.2 percent, according to the analysis.
How consumers are affected by the increases depends on insurers’ approach to offsetting the loss, often under the guidance or direction of state insurance departments. While those with lower incomes who receive premium subsidies through tax credits will generally not face increased costs, middle- and upper-income people ineligible for premium subsidies may face the surcharge if insurers applied rate increases across the board. However, they may be able to avoid premium increases applied only to silver plans by enrolling in a gold or bronze plan.
While consumers will generally be protected, the federal government could pay more in increased premium subsidies than it saves from ending the cost-sharing reduction payments, an earlier Foundation analysis found.