Congress must pass a bill this week to keep most of the government running beyond Friday, when a government spending bill runs out. It won’t be easy.
The debate over a new spending bill focuses on an esoteric issue affecting the Affordable Care Act.
The question is whether Congress will pass — and President Donald Trump will sign — a bill that also funds subsidies for lower-income people who purchase health insurance under the law. These “cost-sharing reductions” (CSR) have become a major bargaining point in the negotiations between Republicans and Democrats, because the spending bill will require at least some Democratic votes to pass.
Here are five things to know about these cost-sharing subsidies:
How are these subsidies different from the help people get to purchase insurance?
There are two types of financial aid for people who buy insurance from an ACA exchange. People with incomes up to four times the poverty line, or $81,680 for a family of three, are eligible for tax credits to help pay their premiums.
In addition to that help, people with incomes up to two-and-a-half times the poverty line, or $51,050 for a family of three, get additional subsidies to help pay their out-of-pocket costs, including deductibles and copayments for care, as long as they purchase a silver-level plan. Insurance companies are required in their contracts with the government to provide these cost-sharing reductions to eligible people, then get reimbursed by the government.
Why are cost-sharing reductions suddenly front and center?
The fight dates to 2014, when Republicans in the House of Representatives filed suitagainst the Obama administration, charging that Congress had not specifically appropriated money for the cost-sharing subsidies and therefore the administration was providing the funding illegally.
A year ago, a federal district court judge ruled that the House was correct and ordered the payments stopped. However, she put that ruling on hold while the Obama administration appealed. That’s where things stood when Trump was inaugurated.
If the Trump administration drops the appeal, the funding would cease. However, Congress could also opt to approve funding the payments, which is what Democrats are pushing in the spending bill.
What would happen if these subsidies are stopped?
At the very least, ending the cost-sharing reductions in the middle of the year would cause a serious disruption in the insurance market. The payments are estimated at $7 billion this year, and $10 billion in 2018. They cover about 7 million people, about 58 percent of those purchasing coverage on the exchanges.
Many experts have predicted that if the subsidies end, some or all insurers might leave their markets entirely, leaving consumers with fewer, or possibly no, choices.
But even if they stay, the Kaiser Family Foundation estimates that insurers would have to raise premiums on the marketplace silver plans by an average of 19 percent in order to offset that loss of government reimbursement. (Kaiser Health News is an editorially independent program of the foundation.)
Ironically, ending the subsidies would actually cost the federal government more money. Premium increases to make up for the lost payments would in turn trigger bigger tax credits for the broader population eligible for help paying their premiums. Those larger tax credits would cost the federal government an estimated $2.3 billion above what it would save on the cost reduction subsidies next year, KFF projected.
Who is pushing Congress to fund the subsidies?
In addition to Democrats in Congress who support the ACA, influential health-related groups are urging lawmakers to fund the cost-sharing reductions.
The coalition, which includes America’s Health Insurance Plans, the American Medical Association, the American Hospital Association and the U.S. Chamber of Commerce, points out that the uncertainty surrounding the future of the promised payments could not only disrupt this year’s insurance market, but next year’s as well.
“The window is quickly closing to properly price individual insurance products for 2018,” the groups wrote to Congress on April 12. Most insurers must decide whether they will participate in the health law’s market in 2018 by late June.
Most Americans don’t support cutting the subsidies as part of a GOP strategy to force Democrats in Congress to help pass a new health law. A new poll reported 60 percent of those surveyed said the president “should not use negotiating tactics that could disrupt insurance markets and cause people to lose health coverage.” On the other hand, two-thirds of Republicans surveyed said Trump “should use whatever negotiating tactics necessary to win support for a replacement plan.”
What does the Trump administration think about this?
Good question. Trump and senior health officials have offered conflicting positions.
On April 10, unnamed officials told the New York Times and other outlets that the administration “is willing to continue paying subsidies” while the lawsuit remains pending, just as the Obama administration did. The next day, however, a spokeswoman for the Department of Health and Human Services disavowed that statement, saying that “the administration is currently deciding its position on this matter.”
The day after that, Trump himself said in an interview with the Wall Street Journal that he was holding back a decision on the payments as leverage. “I don’t want people to get hurt,” he said. “What I think should happen — and will happen — is the Democrats will start calling me and negotiating.”
By the following week, administration officials were dangling the funding for the cost-sharing reductions in the spending bill as a trade for Trump’s request for funding for a border wall. “We don’t like those [subsidies] very much, but we have offered to open the discussions to give the Democrats something they want in order to get something we want,” budget director Mick Mulvaney said on Fox News Sunday. “We’d offer them $1 of CSR payments for $1 of wall payments.”
Democrats, however, are not buying what the administration is selling. “The White House gambit to hold hostage health care for millions of Americans, in order to force American taxpayers to foot the bill for a wall that the president said would be paid for by Mexico is a complete non-starter,” Senate Minority Leader Chuck Schumer (D-N.Y.) said in a written statement.
Complicating matters further, it is far from clear that Republicans in Congress want to end the cost-sharing payments.
The subsidies are “a commitment made by the government to the insurers and the people,” House Energy and Commerce Committee Chairman Greg Walden (R-Ore.) said at a town hall meeting in his district, according to The Washington Post. “That needs to happen.”