Today’s Managing Health Care Costs Number is $7 billion
What if we had an insurance exchange and no insurers came?
That’s the worry this week in health policy circles, as the Trump Administration refuses to commit to reimburse insurers for the “cost sharing reduction” that caps expenditures for those making under 250% of the federal poverty limit. CSRs are expected to be a total of $7 billion next year – and if insurers thought they would not be reimbursed, they would have to hike premiums by 19%. Source: Kaiser Family Foundation
CSRs
Here is why this matters.
Insurance companies must decide by next month whether to participate in the Obamacare exchanges. They could model their decisions based on assumptions either that the Trump Administration continues to pay the CSR fees. If they believe the CSR fees would continue – they would price their ACA exchange plans much as they do now. If they believe the CSR fees would be discontinued, they could increase their exchange prices by 19% (on average – it would be 27% in Mississippi).
The problem is that if they bet they have to charge the extra fees and they are wrong, they will lose pretty much all healthy members (who will go to the lower cost plans), and they will still lose a bundle. If they bet the CSR reimbursement will continue and they are wrong, they will not suffer adverse selection – but they will lose their shirts anyway. Essentially- there is no margin for error because all decisions would be catastrophic if the insurer misjudged the Trump administration’s plans. What insurance company CFO in her right mind would continue to offer products on the exchange?
Some have suggested that the feds will owe this money sooner or later- as the ACA requires it whether or not there are Congressional appropriations. However, in the long run we are all dead (John Maynard Keynes) –and insurance companies are judged by quarterly earnings and risk based capital –so can’t afford a multiyear battle to capture funds owed by the feds. Just ask the CEOs of the Co-Op Plans – but you can’t because the majority went bust when the government didn’t fund the risk corridor reimbursements (thanks, Marco Rubio).
So – if the Trump Administration wants the Obamacare exchanges to die, it need just continue to send mixed messages about whether it will continue to pay the CSR reimbursements, as required by the ACA but opposed by the House of Representatives.
Sarah Kliff of Vox.com on Trump Administration's mixed messages
Carolyn Johnson of Wonkblog on mixed messages
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