CBO: Funding ACA insurer subsidies would reduce federal deficit by $3.8B

Legislation to fund the Affordable Care Act (ACA)’s cost-sharing reduction subsidies for two years while expanding state waivers and availability of catastrophic insurance plans would preserve the current level of health insurance coverage while lowering federal spending, according to the Congressional Budget Office (CBO).

The plan is officially known as the Bipartisan Health Care Stabilization Act of 2017 and has been dubbed Alexander-Murray after its chief architects, Sens. Lamar Alexander, R-Tennessee, and Patty Murray, D-Washington. It centers around two-year funding of the insurer subsidies, known as CSRs, which lower out-of-pocket of ACA exchange silver-level plans for lower-income enrollees. President Donald Trump announced his administration would stop making the payments due to an Obama-era court case which said the subsidies required an appropriation from Congress.

The CBO and Joint Committee on Taxation (JCT) report assumed in its baseline that the CSRs would be funded, saying despite the president’s order to halt payments, it still falls under “entitlement authority” spending which doesn’t require an appropriation in its projections. If the baseline had no assumed no CSRs would be paid, then the Alexander-Murray bill would’ve been projected as reducing deficits by nearly $200 billion.

In contrast, the CBO had earlier estimated cutting off the subsidies would increase premiums by 20 percent and add $194 billion to the federal deficit, as the higher premiums would leave the federal government on the hook for paying more in premium support subsidies.

Some of the savings would come from rebates paid by insurers to the federal government as a way to make sure insurers don’t pocket the money from higher premiums based on uncertainty surrounding the CSRs.

“CBO and JCT estimate that the federal government would receive rebates from insurers totaling about $3.1 billion over the 2018-2027 period,” the report said. “There are a variety of ways states could choose to implement the rebates; some would be recorded in the federal budget as an increase in revenues, and others would be recorded in the budget as a decrease in outlays.”

Another element of the bill favored by Democrats would require HHS to spend $105.8 million of existing ACA user fees in both 2018 and 2019 for outreach and enrollment activities to encourage people to sign up for coverage through Healthcare.gov. This wouldn’t have a budgetary impact, the CBO report said, as the funding is already there, but could increase enrollment and the number of people receiving premium support subsidies—though by how much the report said it couldn’t estimate.

The provisions in the bill backed by Republicans were expanding the ACA’s Section 1332 “state innovation waivers” and the availability of catastrophic plans to enrollees of any age. The former wouldn’t have much of an impact on federal spending, the CBO report said. The latter, however, may “slightly” lower premiums because these lower-premium, higher out-of-pocket cost plans would be part of the single ACA risk pool, potentially attracting healthier customers.

“As a result of the slightly lower estimated premiums, CBO and JCT expect that federal costs for subsidies for insurance purchased through a marketplace established under the ACA would decline by about $1.1 billion over the 2019-2027 period,” the report said.

Alexander and Murray said in a joint statement the analysis showed their bill benefits “taxpayers and low-income Americans, not insurance companies,” a reference to attacks from Trump that the bill is a “bailout” for insurers.

While Alexander and Murray referenced having 60 senators involved in the process, which is the number of votes they would need to pass the legislation, more conservative Republicans remain wary. Sen. Orrin Hatch, R-Utah, along with Rep. Kevin Brady, R-Texas, have introduced an alternative bill which would also fund the CSRs while temporarily repealing the ACA’s individual and employer mandates, which Democrats are unlikely to support.

“Millions of families in Texas and across the country still trapped in Obamacare are desperately looking for relief – not a reinforcement of today’s failed status quo,” Brady said in a statement.

In the House, some Republicans feel funding for the CSRs is unacceptable.

“What we should be doing is… what we told the American people we were going to do—pass [repeal] legislation,” Rep. Jim Jordan, R-Ohio, told The Hill. “Not some bailout for insurance companies.”

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John Gregory, Senior Writer

John joined TriMed in 2016, focusing on healthcare policy and regulation. After graduating from Columbia College Chicago, he worked at FM News Chicago and Rivet News Radio, and worked on the state government and politics beat for the Illinois Radio Network. Outside of work, you may find him adding to his never-ending graphic novel collection.

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