Higher premiums likely if federal healthcare payments withheld

Aug 2, 2017

Experts are warning that the President's threats to "hurt" health insurance companies by withholding federal Cost Sharing Reduction payments could destabilize the marketplace and cause premiums to spike.

"Those that would receive the highest increases are those that can least afford it," said David Anderson, CEO of HealthNow New York, which does business as BlueCross BlueShield in Western New York.

Cost sharing reductions, or CSRs as the federal payments are known, subsidize the premiums of low-income customers who cannot otherwise afford to buy health plans on the individual market. Angry that Congress failed to repeal the Affordable Care Act, President Donald Trump has called the payments "bailouts" for insurers that "will end soon."

However, Anderson said ending the payments at this stage of the game would only hurt customers. He compared it to telling football players a touchdown is worth six points, but then giving them only five.

"We have filed rates. We've received a certain level of funding expectation from the federal government. And now that we have filed, they're coming back to say, 'Well, that part of the funding may not be paid' - and that changes the rules of the game after the fact," he said.

Anderson said if the funding were cut off, BC/BS plans to individuals receiving cost sharing reductions would be "underfunded" because of three contributing factors.

"We were asked to submit rates on the assumption cost sharing reductions would be paid or not paid," Anderson said. "The difference between those two filings for us here in Western New York was 18 percent."

So without cost sharing payments from the federal government, Anderson said customers would pay 18 percent more. In addition to that would be the normal "3-7 percent" increase in annual healthcare costs, plus the rate hike already submitted to and expected to be approved later this month by New York State for 2018.

"We've filed rates this past year well above 20 percent and that assumed cost sharing reductions were paid," he said. "Lack of cost sharing reductions would be on top of that....In a worst-case scenario, it could have a pretty significant impact on our rate increases."

Without putting a specific figure on increases, Anderson agreed they could be as high as 40 percent. He supports lawmakers who have come out in favor of continuing CSR payments.

"I do not want to destabilize the individual market and so the payments should continue, in my opinion, for the short term," said Southern Tier Congressman Tom Reed in a conference call with reporters. "But [in the] long term, we’re going to have to address this issue."

Reed and a bipartisan group of Congressional representatives released a set of ideas to improve the Affordable Care Act. In May, he and other upstate Republicans voted for the House's version of a plan to repeal and replace the Affordable Care Act. The Senate voted "no" on its own plan last week.

"We're operating in a marketplace where funding is uncertain," Anderson told WBFO. "The reason that people have health insurance is to create stability and predictability and make sure things are something they can count on and have security for having those policies - and what's been going on in Washington, D.C. is exactly the opposite."