New data suggest that one aspect of President Trump’s attempts to mortally wound the Affordable Care Act (ACA) has in fact helped more HealthCare.gov enrollees than it has hurt. By stopping federal payments to insurers for cost-sharing reductions in their health plans, he caused insurers to raise silver-plan premiums and, with them, premium tax credits. Because of this, Health Insurance Marketplace monthly premiums paid after tax credits (among those receiving them) have dropped from $106 to $89, or by 16 percent, between 2017 and 2018. In some states, these savings are greater than 25 percent (see Figure 1).
Additionally, as described below, it appears that many more enrollees are paying less rather than more in premiums as a result of this singular action (see Figure 2). Only about 4 percent of HealthCare.gov enrollees are paying the full cost of the increased silver-plan premiums, while many, if not most low- and middle-income enrollees are paying less. While other Trump administration policies (e.g., shortening open enrollment) decreased HealthCare.gov enrollment for 2018, this analysis suggests that halting payments for cost-sharing reductions may have counterbalanced this harm. As such, Congress should think twice before restoring cost-sharing reduction payments.
President Trump has repeatedly said that the best thing for Republicans would be to “let ObamaCare implode.” Numerous administration actions, from his first executive order to recent rules, seek to catalyze such an end. One such action was stopping federal payments to health insurers for “cost-sharing reductions.” Cost-sharing reductions are provided to Marketplace enrollees in silver plans with income between 100 and 250 percent of the poverty level to lower their deductibles, co-pays, and coinsurance for health care services. Insurers pay 70 percent of total average costs for covered benefits in “silver” plans, 60 percent in “bronze” plans, and 80 percent in “gold” plans. Even though insurers by law must provide cost-sharing reductions, House Republicans sued the Obama administration over whether Congress authorized reimbursing insurers for the value of this benefit (approximately $8 billion per year). On October 12, 2017, the administration announced it agreed with the House on the lack of authority and thus ceased making such payments. Last April, President Trump said of such Marketplace payments, “If you don’t make them, [the Marketplace] fails.” Indeed, when he said this, a wide range of stakeholders raised concerns about short-term disruption, insurer exits from the Marketplace, and unaffordability of premiums as a consequence.
Most states and insurers both anticipated and reacted to this decision through “silver-loading.” This meant adding the amount of the lost federal payments to silver-plan premiums, which are the basis for the amount of the Marketplace premium tax credits. Marketplace enrollees with income from 100 to 400 percent of the poverty level pay no more than a fixed percent of income for the second-lowest silver plan. Thus, they are insulated from paying the extra premium amount due to the administration’s action; instead, premium tax credits absorb this add-on. As a result of silver-loading, silver-plan premiums rose disproportionately faster than bronze- and gold-plan premiums from 2017 to 2018: 32 percent compared to 17 and 18 percent, respectively. They also rose for all silver-plan enrollees: those receiving cost-sharing reductions, those only receiving premium tax credits, and those with high income who receive neither.
The April 3, 2018 release of data on 2018 Marketplace open enrollment offers a preliminary look at the impact of the administration’s cost-sharing reduction policy. As predicted, premium tax credits rose along with silver-plan premiums, lowering after-tax credit premiums in the process. As the administration reported, enrollees receiving tax credits are paying $89 per month on average, compared to $106 per month in 2017. The state-level data show that this 16-percent drop in premiums varied from over 25 percent in some states to an increase in others. This variation reflects both different state and insurer decisions on silver-loading as well as the other factors at work that affect premiums (e.g., local competition and fear that lack of enforcement of the individual mandate would drive up premiums).
Looking more closely at the data, the effects of the cost sharing decision should, and do, vary by income group. Policy makers have expressed the greatest concern for high-income enrollees who lack the protection of tax credits against high premiums. This group accounts for 11 percent of total enrollment (about 990,000). For 2018, only about 35 percent of high-income HealthCare.gov enrollees signed up for a silver plan (down from 44 percent in 2017). In other words, only about 340,000, or 4 percent of total HealthCare.gov enrollees, are actually paying higher silver-plan premiums due to the lack of cost-sharing reduction payments. The share of high-income enrollees in bronze plans increased, although, given silver-loading, the premium savings of switching to bronze plans likely exceeds the increase in average cost-sharing between bronze and silver plans. There was an 11 percent decline in enrollment in unsubsidized enrollees from 2017 to 2018.
Middle-income enrollees with income between 200 to 400 percent of the federal poverty level should be—and appear to be—better off as a result of silver-loading. They qualify for less generous premium tax credits and low to no cost-sharing reductions. With higher premium tax credits, many could buy bronze plans for free, or gold plans with lower deductibles and copays for a lower monthly premium. The data show that, indeed, only 43 percent of this group in 2018 are enrolled in silver plans in HealthCare.gov states, down from 60 percent in 2017. It appears that the share of middle-income people in gold plans doubled from 2017 to 2018. The share in bronze plans rose by 9 percentage points. The roughly 1.1 million middle-income enrollees who appear to have stayed in bronze or gold plans from 2017 to 2018 are probably paying less for the same level of coverage. The number of middle-income enrollees increased slightly from 2017 to 2018, to 2.89 million or 33 percent of all enrollees—despite a drop in overall number of HealthCare.gov enrollees.
Low-income enrollees with income between 100 and 200 percent of the federal poverty level comprise most (4.87 million or 56 percent) of the total HealthCare.gov enrollees in 2018. They qualify for both premium tax credits and cost-sharing reductions, which are only provided through silver plans. Not surprisingly, the share of low-income HealthCare.gov enrollees remaining in silver plans did not dramatically change: 85 percent in 2018 compared to 87 percent in 2017. There was not a meaningful shift to bronze or gold plans. That said, those in such plans likely paid lower premiums due to the higher premium tax credit in 2018. The number of low-income enrollees dropped by 7 percent from 2017, most likely due to the shorter open enrollment period and significant cuts in funding for Navigators (who help people through the enrollment process), outreach, and education.
In summary, as Figure 1 shows, most Marketplace enrollees getting premium tax credits are paying less in part due to the Trump administration’s decision to halt cost-sharing reduction payments. And, as seen in Figure 2, more HealthCare.gov enrollees are likely paying less and not more in premiums as a result. That said, these data are not detailed enough to quantify the precise savings and costs to enrollees, and factors other than the cost-sharing reduction policy may be at work.
Despite the Republican president and Congress failing to repeal the ACA, efforts to undermine it continue. Insurers as well as experts expect that proposed executive actions could significantly raise premiums in 2019 for Marketplace enrollees, especially when combined with the repeal of the individual mandate penalty. And enrollment for 2018 could have been 1 million higher had the administration funded outreach as it did in the past. That said, this analysis suggests that President Trump’s attempt to “kill” the Marketplace by stopping $8 billion in federal payments to insurers has backfired, strengthening the Marketplace instead. As such, Congress should consider options other than restoring cost-sharing reduction payments to help the small fraction of high-income enrollees paying excessively high premiums. It should also prevent the administration from administratively blocking silver-loading, which a senior official said it is considering.
Cover Photo: U.S. President Donald Trump shows an executive order after he signed it as Sen. Rand Paul (R-KY), Vice President Mike Pence, Rep. Virginia Foxx (R-NC) and Secretary of Labor Alexander Acosta look on during an event in the Roosevelt Room of the White House October 12, 2017 in Washington, DC. President Trump signed the executive order to loosen restrictions on Affordable Care Act ‘to promote healthcare choice and competition.’ (Photo by Alex Wong/Getty Images)