There is a growing likelihood that the current administration will terminate funding for the Affordable Care Act’s (ACA) cost sharing reduction (CSR) subsidies some time within the next two months. The administration has the discretion to terminate funding for these subsidies without congressional action.
The CSR subsidies help individuals enrolled in ACA exchange plans cover the cost of deductibles, coinsurances, and copayments through payments to health plans. Eliminating the subsidies would reduce federal payments to health plans by $7 to $8 billion in 2017 and $10 billion in 2018.
Many health plans may need to choose between:
- accepting large financial losses,
- leaving the individual and “exchange” market as quickly as possible,
- attempting to raise premiums, and (or)
- renegotiating contracts and other arrangements with providers.
Health plans and the heath plan associations are now exploring various options. Providers may want to review their agreements with health plans to understand when and how health plans may renegotiate payment and other arrangements. In particular, you may want to review any provision affording health plans the right to renegotiate the agreement if Congress or the administrative agency makes material amendments to law, regulation, or policy.
Why Would The Administration Terminate The CSR Subsidies?
The administration may terminate these CSR subsidies for several reasons.
First, eliminating the subsidies could create an immediate “crisis,” and many in the administration believe that without a crisis, the Senate will delay acting on an ACA replacement bill.
Second, a crisis places the Democrats in the difficult position of either opposing a bill that extends the subsidies or...
