CEDAR RAPIDS - After months of threats, President Donald Trump announced late Thursday he immediately would end payments to health insurers that help millions of lower-income Americans afford coverage.
Under the Affordable Care Act, cost-sharing reductions are federal payments made to insurers that help eligible consumers afford their deductibles and other out-of-pocket expenses.
The costs of these payments were at $7 billion in fiscal year 2017 and could hit $10 billion in 2018 and $16 billion by 2027, according to estimates by the Congressional Budget Office.
In Iowa, about 20,000 people qualify for cost-sharing reductions, which translates to about $65 million worth of payments to insurers.
With the start of open enrollment for Obamacare just three weeks away — starting Nov. 1 — here are three things Iowans need to know:
1. The change won’t further affect 2018 rates (because insurers were anticipating this).
In August, Minnesota-based Medica — the only insurer selling statewide plans on Iowa’s individual market — asked the state for an average 56.7 percent rate increase above 2017 rates.
The reason for the eye-popping increase? The uncertainty at the time over the funding of cost-sharing reductions.
Medica initially sought a rate increase of 43.5 percent, but the insurer plotted out this worst-case scenario and went back to ask the Iowa Insurance Division to approve the recalculated, higher rates — which the insurance division did.
“The decision by President Trump to end CSR payments will not change Medica consumer’s current health plans or change the options available to them in 2018,” said Geoff Bartsh, Medica vice president for individual and family business, on Friday. “Our premiums for 2018 anticipated this action and were increased previously to account for it.”
2. Iowans are still eligible for subsidies.
Cost-sharing reductions are different from the subsidies consumers receive to help cover premiums. Cost sharing reductions are federal payments made to insurers. The payments help cover costs for low-income individuals enrolled in an Obamacare plan.
Most Iowa customers qualify for subsidies and those increase as the price of premiums increase.
“The bottom line is that we anticipated this action in our filings and we are prepared,” Bartsh said. “We strongly encourage consumers to shop on the insurance exchange in their state. Federal subsidies are not going away and, as a result of this action, will go up resulting in lower cost options for many consumers.”
Unfortunately, there is a group of individuals who will feel the full brunt of that 56.7 percent increase: The 28,000 Iowans shopping on the exchange who live above the 400 percent poverty level and are not eligible for subsidies. The insurance division has said that a 55-year-old couple making $65,000 a year could pay as much as $33,000 annually for premiums.
3. This change doesn’t impact the Iowa Insurance Commissioner’s “stopgap” measure — though that still hasn’t been approved.
In August, Insurance Commissioner Doug Ommen submitted the state’s final plea to the federal government, asking for permission to make changes he believes will buoy Iowa’s struggling Affordable Care Act marketplace.
The stopgap seeks to temporarily provide consumers with age- and income-based tax credits, as well as use a reinsurance mechanism for insurers for costly medical claims. The state still is waiting to hear whether that waiver request will be approved.
The proposal is not meant to fix all the issues, Ommen has said, but he believes it can stabilize the market by bringing more healthy and young individuals into the marketplace, as well as more insurers.
The Insurance Division said Friday that because the final waiver submission for the Iowa Stopgap Measure only included Advanced Premium Tax Credit funds and not cost-sharing reduction funds, there is no impact by Trump’s action on the proposed stopgap measure.