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If cost-sharing subsidies are cut, will I be affected?

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Understanding the impact on consumers

President Trump’s executive order to cut “cost-sharing reduction” payments to insurers created a lot of questions for consumers. What are the payments, and will cutting them affect consumers next year?

The short answer is no. If you are eligible for these reductions, you will not be impacted next year. But consumers who do not receive any subsidies for indiviual insurance will be affected, and the ramifications of cutting the payments, sometimes called CSRs, could be felt by all individual consumers in 2019.

First, what are CSR payments?

Through the Affordable Care Act, low-income consumers are eligible for health plans with lower deductibles and other cost-sharing. Insurers are then reimbursed by the federal government for the discount they offered to consumers. These reimbursement payments are called CSRs.

Congress never approved these payments, so some House Republicans sued to stop them in 2014. The case is tied up in court, but a judge allowed the White House to continue funding the payments until a resolution is reached. The previous administration chose to fund them, but the Trump administration has chosen to cut them.

So will consumers’ plans be affected?

Cost-sharing plans will not be affected 2018. The cost-sharing plans, and their lower deductibles, are locked in at their existing premium rates for 2018. Insurers still have to provide these plans, they just won’t be reimbursed by the federal government. Essentially, insurers are now discounting the cost-sharing themselves.

However, most insurers increased premiums for 2018 to cover this uncertainty, higher than they would have if the payments were assured. Consumers who do not receive cost-sharing or premium subsidies face the full cost of their premiums, and are affected by that additional rate hike.

Additionally, if insurers have to cover these payments next year, it is pretty likely they will not want to sell individual plans in 2019, or they will raise their premiums even more in 2019 to cover the costs.

Consumers would be affected by these decisions, but not until they tried to sign up for 2019 coverage.

Are the payments definitely being cut?

Adding more confusion to the situation is that Congress could approve the payments before 2018, which would reverse Trump’s decision. Senators Lamar Alexander and Patty Murray have reached a bipartisan compromise to fund the CSRs in 2018 and 2019, but the bill has to be passed by Congress first.

If they do pass the bill, the market will likely stabilize through the next two years. If they don’t pass it, some consumers may have fewer options—or none at all—for individual insurance in 2019.

Right now, no one knows if the bill will pass or not, so the fate of CSRs is still up in the air.

But the main takeaway is that insurers are locked in for 2018, so consumers will not see any changes to their 2018 plans, premiums, or deductibles.

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