Loss of Obamacare subsidies would cause spike in Mass. Health Connector rates
Gov. Charlie Baker, who is in the midst of assessing new health care assessments on employers, has been advocating for the continued flow of so-called cost-sharing reduction payments from the federal government that the governor says are worth $146 million in Massachusetts this fiscal year.
Hours before the White House announcement, a state agency run by the Baker administration announced it would forge ahead with lower premium increases based on the expectation that the federal payments will continue. Now it appears the Massachusetts Health Connector may need to aggressively pursue contingency plans.
"Based on guidance from the Department of Justice, the Department of Health and Human Services has concluded that there is no appropriation for cost-sharing reduction payments to insurance companies under Obamacare. In light of this analysis, the Government cannot lawfully make the cost-sharing reduction payments," the White House said in a statement released just before 11 p.m. Thursday.
The statement continued: "The United States House of Representatives sued the previous administration in federal court for making these payments without such an appropriation, and the court agreed that the payments were not lawful. The bailout of insurance companies through these unlawful payments is yet another example of how the previous administration abused taxpayer dollars and skirted the law to prop up a broken system. Congress needs to repeal and replace the disastrous Obamacare law and provide real relief to the American people."
In the face of strong resistance from Democrats, Trump and the Republican-controlled Congress have been unable to agree on repealing, replacing or amending the Affordable Care Act, and the president's announcement about halting subsidies marks the latest chapter in a consequential yearlong health care debate.
The cost sharing reduction payments are available for individuals and families with incomes up to 250 percent of the federal poverty level, about $60,625 for a family of four. According to Massachusetts insurers, 244,400 enrollees in 2016 benefited from subsidies that lower out-of-pocket expenses like co-pays and deductibles.
As many as 80,000 consumers who buy insurance through the Connector could be affected by the decision, officials say. The standard rates the Connector agreed on Thursday to promote stability would mean those consumers will see average premium increases of 10.5 percent next year. Under rates associated with the loss of payments, consumers would have seen an average premium increase of 26.1 percent in 2018.
The Health Connector on Thursday said it has been monitoring the "federal conversation" about the cost sharing reduction payments, but appears to have been blindsided by the White House announcement.
"We spent significant time over the last few months with the Division of Insurance and our carriers discussing the ramifications of potential federal action cutting off CSR payments in the future, and felt it prudent for now to maintain a steady state for our members," Louis Gutierrez, executive director of the Massachusetts Health Connector, said Thursday.
The Health Connector has another option that could blunt the impact of changes at the federal level. On Sept. 8, the Baker administration submitted a Section 1332 waiver seeking to establish a Premium Stabilization Fund in lieu of cost sharing reduction payments and authority to waive them and instead receive any federal premium tax credit savings that will accrue as a pass-through, which could be used to stabilize premiums, according to the Connector.
A Connector official said a federal ruling on those requests can take seven months; the Connector requested a "fast-track review" and an answer by Sunday.
In a letter this month to the Massachusetts congressional delegation, Baker said uncertainty around the payments is a threat to the local market.
"As we approach the start of Open Enrollment on November 1, it is critical for federal cost sharing reduction payments to be resolved affirmatively in order to maintain market stability and to constrain rate increases," Baker wrote. "If Congress does not act to stabilize the insurance market by funding the CSRs, then 80,000 Connector members would directly experience premium increases of 20 percent or more in addition to potential disruption in their health care provider."
Baker in September testified before the U.S. Senate Committee on Health, Education, Labor and Pensions about the importance of continuing the payments, a topic on which he and U.S. Sen. Elizabeth Warren found common ground. The governor testified that Congress should appropriate money to cover payments for at least the next two years to give insurers some certainty about the funding stream while longer-term cost controls are debated.
Officials at the Health Connector were not immediately available early Friday to respond to the White House's announcement.
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