In April, I reported from the National Association of Insurance Commissioner’s (NAIC) spring meeting in Denver that uncertainty over the future of the Affordable Care Act’s (ACA) cost-sharing reduction (CSR) payments was the prevailing theme in the health insurance meetings. Today, fresh off the heels of the NAIC’s summer meeting in Philadelphia, I can report once again that uncertainty over CSR payments is the talk of the town (at least when the NAIC is in town).

Despite five months of relentless attacks on the ACA by House and Senate Republicans, somehow we were right back where we started in the spring. Only this time, the clock is running out. Open enrollment is right around the corner and that means insurers and state regulators are quickly approaching deadlines to finalize plans for 2018. Perhaps in response to growing concerns from insurers and insurance commissioners, on August 10, CMS released a revised timeline for finale rates and final marketplace contracts. Revising the timeline is helpful, but it doesn’t solve the underlying problem. With no indication of the future of CSR payments (at least outside of Twitter), no guidance on the continued enforcement of the individual mandate and no confirmation the federal government will play any role in outreach, education or enrollment this year, simply pushing back the timeline doesn’t cut it. 

How are state regulators responding to the CSR uncertainty?

Much of the discussion in the health insurance meetings focused on how states are planning for nonpayment of CSRs and trying to mitigate the uncertainty. Some states asked insurers to submit dual filings, one assuming CSRs are paid and the other assuming they are not. Other states instructed insurers to submit filings assuming the Trump administration makes the payments, but they will ask insurers to re-file in the event that it becomes clear the administration will terminate the payments. Beyond the rate filing itself, the big question is how to account for a CSR-related premium increase. It’s well documented by now that to make up for no CSR payments insurers would need to raise rates by 19 percent, on average, on top of any other annual increase. The best case scenario, from a consumer perspective, is if insurers load any premium increase resulting from nonpayment of CSRs to silver-level marketplace plans. Because subsidies will be based on the cost of the second lowest-cost silver plan, any increase in those premium rates will cause subsidies to increase as well, which will blunt the cost increase for subsidy-eligible consumers. According to one projection, this scenario could lead to subsidy increases significant enough that consumers could get bronze-level plans at no cost or gold-level plans at a very low cost.

In June, California’s state-based marketplace, Covered California, instructed carriers to use this approach. They asked plans to submit dual rate filings and in the filing accounting for no CSR payments to load any premium increase to the silver-level marketplace plans. Additionally, to protect consumers who aren’t eligible for subsidies, Covered California directed carriers to offer a plan outside of their marketplace similar to their standard benefit design but without the additional premium increase. Other states, like Michigan, have provided similar guidance to their insurers while others, like Tennessee, are still weighing their options.

Stabilizing Marketplaces for 2018 and beyond

A presentation by the consumer representatives to the NAIC, including yours truly, outlined short- and long-term considerations for stabilizing marketplaces. Beyond the CSR issue, we highlighted the challenges for this year’s open enrollment period. First, with ACA repeal dominating the headlines for a majority of the year, consumers are confused and uncertain about the future of their coverage. Second, this year’s shortened open enrollment period – and changes like premium repayment rules – leave less time to educate consumers about their coverage options and present a real risk that consumers will miss the open enrollment window. Finally, with no indication that the federal government is gearing up for a robust outreach and education campaign, much of this responsibility will fall to the states. We encouraged states to increase state-based strategies to market, educate and enroll consumers this year. For example, states operating their own marketplaces can choose to keep a longer open enrollment period, like Colorado. Additionally, states should be prepared to dedicate adequate funding to marketing efforts and to ensure consumers have the information and assistance they need to get covered in the absence of federal help.

Finally, after much discussion at the meeting on emerging state reinsurance efforts, we recognized that these programs have promising potential to bring short-term stability to marketplaces suffering from increased premiums and issues with plan competition in a way that will ultimately benefit consumers. However, we acknowledged that as we move past these short-term stabilization efforts states will play an important role in working through longer-term stability solutions to address affordability and market competition. Polices like Medicaid buy-in programs, state public options or plan participation requirements have the potential to bring longer-term stability and address some of the marketplaces’ biggest challenges.

It’s impossible to predict what’s around the corner for states to react to on the federal level, but states can and should continue to work on innovative and consumer-friendly policies that hold consumers harmless and ultimately lead to more long-term success and sustainable ACA marketplaces.