President Donald Trump’s decision Thursday to end federal payments to health insurance companies that subsidize low-income people using the Affordable Care Act is expected to increase premiums for more than 100,000 in Washington.
Insurance Commissioner Mike Kreidler criticized Trump’s decision to stop the subsidy payments, known in the industry as “cost-sharing reductions,” or CSRs.
Kriedler called the order “a devastating blow to thousands of people in Washington state” that “further threatens the stability of our individual health insurance market.”
People buying insurance on the individual market who earn 138 percent to 250 percent of the federal poverty level qualify for lower deductibles and lower out-of-pocket costs because of the CSRs. Insurance companies still must give the discounts, but the companies won’t get federal help to pay for them.
About 70,000 people in Washington received a cost-sharing subsidy this year.
Trump’s order will not affect 2017 coverage for people who already bought insurance on the individual market. But it will likely affect thousands of people in the state next year.
Premiums are likely to rise for some
To even out losses from not getting CSR money, insurance companies plan to tack on extra costs to those buying “silver” insurance plans.
The health care exchange has four levels of insurance plans: bronze, silver, gold and platinum. Bronze has the lowest monthly premiums, but the highest out-of-pocket costs. Platinum has the highest monthly premiums, but the insurance company pays more for health care.
Silver plans are the only ones required under the Affordable Care Act to offer the cost-sharing discounts to those who are eligible, but silver plans also serve more than 30,000 who don’t qualify for the subsidy.
Specifically because of Trump’s order, premiums for silver plans are expected to rise 9 percent to 27 percent next year, said Stephanie Marquis, a spokeswoman for the state’s Office of the Insurance Commissioner.
The specific increase for individuals likely will depend on factors such as household income and where people live, said Michael Marchand, chief marketing officer for the Washington Health Benefit Exchange.
The Congressional Budget Office predicted premiums for silver plans offered through marketplaces would rise across the country about 20 percent on average in 2018 because of the order.
Rates might rise even further because of other Trump orders, such as the weakening of the requirement that people buy health insurance. That rule, known as the individual mandate, keeps younger, healthier people in the insurance pool to balance out older people with higher health-care costs.
Opponents of the mandate say people should not be required by the government to buy health insurance, which can be a costly burden.
Credits mean some might come out ahead
The CBO estimates Trump’s order will mean “slightly” more people will be uninsured in 2018 but “slightly” more people will have insurance in 2020.
That’s because the rise in premiums will increase tax credits for some, leading more people to eventually buy health insurance in the individual market.
People with income that rates 100 percent to 400 percent of the federal poverty level for their household size qualify for a premium tax credit. The size of that credit is based on the premiums for the second-lowest-cost silver plan.
So if silver plan premiums rise, so will tax credits.
Marchand said the CSR payments ending will “be a good thing for some people” who receive tax credits, because they might find their current plans, or other plans, suddenly cheaper.
For those making enough money that they don’t qualify for the tax credits, the premium increases could hit harder.
“I think it really hurts the middle class,” Marchand said.
Insurance companies could abandon market
Trump’s order could prompt health insurance companies to leave the individual market because of the added costs, Marquis said.
That problem could hurt most in rural areas where fewer insurers operate.
Two counties, Klickitat and Grays Harbor, nearly did not have individual health insurance options for 2018 until insurance companies agreed to join at the last minute.
Marquis said she believes “most” insurance companies “are committed to the market this year.”
“But we’re worried about next year,” she said.
The CBO predicted more people would live in areas without insurers in the next two years because of the order.
Can premium rises be avoided?
The status quo could be returned if Congress authorizes the CSR payments. Especially if they are approved long term.
Whether political will exists to make that happen is unclear. Some top Republicans want to keep the payments, at least temporarily. Others say they should go.
A group of states are suing to try to force the federal government to make CSR payments. Washington Attorney General Bob Ferguson announced Friday he will join the effort.
Separately, Washington is looking to see whether any local policy can lower the cost of health insurance. The Legislature approved new exemptions to the Public Records Act this year to help further that study.
Such policy could cost the state extra money, however, likely leading to a budget battle.
There’s also discussion in Congress over bigger federal health care changes.
U.S. Sens. Patty Murray, D-Washington, and Lamar Alexander, R-Tennessee, are working on bipartisan legislation to stabilize the health care system.
In a health care-related visit to Tacoma this week, Murray told The News Tribune and The Olympian that she and Alexander were “working together to find a way to deal with the short-term issue that we have right now which is insurance rates going up and bare counties in our states.
“We believe that we can get a package put together. We’re working on it very hard.”
Is state’s individual market doomed?
Gov. Jay Inslee on Friday said in a statement that Trump’s order would create “chaos and instability in the marketplace.”
Marchand predicted that could be true, especially across the country, but he cautioned that Washington’s individual health insurance market is more stable than others.
Marchand said the market being state-run helped better prepare insurers for the possibility that cost-sharing payments would stop. It’s also generally in better shape than exchanges in states that didn’t embrace the Affordable Care Act.
Washington’s individual market’s fate also might depend on what Congress and local officials do next.
“There’s a scenario where, yes, this does lead to the unraveling,” Marchand said. “There is also a scenario where the storm is weathered and cooler heads prevail, so to speak.”