Earlier in October, the Trump Administration announced it would immediately terminate payments to insurers to offset the costs of ACA-mandated discounts on co-payments and deductibles for low-income consumers. A number of states and the District of Columbia sued to force the administration to continue these payments. On October 25, the plaintiffs’ request for a preliminary injunction was denied, which means that the payments will likely not resume absent Congressional action. However, states have allowed insurers to increase premiums for 2018 to reflect the greater cost of coverage without the government’s cost-sharing payments. As a result, the impact of this executive action on the Exchange market during the next open enrollment period (starting on November 1) will be to raise rates on some plans, but that may be mitigated by increased premium tax credits. The move may also leave insurers reluctant to participate in the Exchanges after 2018 without resumption of these cost-sharing reduction payments.

One component of the ACA requires insurers to provide reduced out-of-pocket limits, deductibles, and other cost-sharing for low-income individuals. Although the ACA requires the federal government to compensate insurance companies for these reductions, the ACA does not expressly appropriate funds for these reimbursements. Back in 2013 the Obama administration decided it had the authority to make such payments, which became known as cost-sharing reduction payments, or CSRs. The House of Representatives responded with a lawsuit. A federal judge ruled against the administration, but stayed the order pending appeal by the Obama Administration, and so the CSRs continued.

As described in a prior advisory earlier this month President Trump issued an Executive Order to make certain changes to the ACA, including allowing for the expanded use of HRAs and loosening restrictions on Association Health Plans. Shortly thereafter, on October 12, the White House announced that it would immediately stop CSRs absent Congressional appropriation of funds for the payments. In response, eighteen states and the District of Columbia sued the Trump Administration, asserting that this sudden change would throw the individual insurance market into disarray ahead of the open Exchange enrollment period starting on November 1.

On October 25, a California federal judge denied the request to issue a preliminary injunction against the Administration. Among the factors cited in the decision is that many states had already priced premiums, particularly for silver-level plans, for 2018 based on the assumption that the CSRs would not continue. In those states, although the cost of silver plans will increase, premium tax credits will also be increased to account for the increased premium costs, such that individuals who receive premium tax credits will not be affected. In some cases, other types of plans may become even more affordable as a result of the increased premium tax credits, and individuals may be able to purchase better coverage for the same or less cost. On the other hand, people who do not qualify for premium tax credits would likely pay more for Exchange coverage, particularly if they choose a silver plan.

Congressional action will likely be necessary in order to restore stability to the individual insurance market after 2018. Insurers will be hesitant to agree to participate in the Exchanges without the make-whole CSRs, and increased premiums will discourage individuals from purchasing insurance, even if low-income individuals may not be adversely impacted after factoring in premium tax credits. Senators Lamar Alexander and Patty Murray have reached agreement on a bipartisan bill to appropriate the CSRs and make other ACA changes. Even with 12 Republican co-sponsors, however, it may not even get a vote until President Trump signals that he will sign it. For now, the wild ride known as the ACA continues.