Cuts to cost-sharing, consumer assistance has resulted in higher costs to ACA enrollees
As one of many tweaks to the ACA, the Trump Administration ended direct reimbursement for cost-sharing for ACA marketplace plans in 2018.
A Trump Administration move that was widely seen as an effort to undermine the Affordable Care Act (ACA) has had predictable results, a new report finds: it has made health insurance more expensive for consumers.
The report, released by the Robert Wood Johnson Foundation (RWJF), looks at the Trump Administration’s decision in 2018 to end direct reimbursement for cost-sharing for ACA marketplace plans.
Related: Expanding subsidies for the ACA marketplace: Yay or nay?
As written, the ACA, also called Obamacare, required insurers offer reduced cost-sharing plans to Americans with low incomes who chose the ACA’s silver-level marketplace plans. These plans reduced enrollees’ out-of-pocket costs—such as deductibles and co-insurance payments—making the plans more affordable.
The Trump Administration’s abrupt ending of federal reimbursements to insurers for this type of cost-sharing resulted in higher premiums throughout the marketplace, as insurers sought to spread out the additional costs. The RWJF report analyzes how the market responded over time to this change.
“Piece by piece” attacks on ACA
The move was widely seen at the time as a way for President Trump, who had made ending Obamacare one of his primary political goals, to undercut the program after failing to repeal and replace it with new legislation in 2017.
When the change was announced, Trump tweeted: “Obamacare is a broken mess. Piece by piece we will now begin the process of giving America the great HealthCare it deserves.” Three years later, the administration still is struggling to formulate a replacement to the ACA, but a lawsuit that the administration supports may successfully end the health care law when the Supreme Court hears the case in November.
At the time of the change, more than 6 million ACA enrollees had plans that received cost-sharing subsidies. The response from insurers was mixed—some threatened lawsuits, but other said they had prepared for the change. However, since the program was ended in October of 2017, insurers were on the hook for costs for that year—a total of more than $1 billion, according to an Urban Institute estimate. Other reports noted that the move would actually cost the federal government $7 billion more in 2018 because of higher enrollee subsidies to cover the increase in ACA premiums.
The result was a shift of enrollees toward bronze plans, the new report found: “In 2018, after federal reimbursement of cost-sharing subsidies ended, the silver plan premiums rose to an average of 38% above the lowest-premium bronze plan, sparking an 11-percentage-point drop in the share of marketplace enrollees buying silver plans. Most of that enrollment drop shifted into lower-priced bronze plans, coverage that requires substantially higher out-of-pocket costs when using medical care.”
“Silver loading” as a response to reimbursement cuts
The RWJF analysis said that after the change in funding, many state insurance commissioners instructed insurers to add the additional costs to silver ACA plans—which were the most popular plans, with more than 75% of ACA members enrolled in those plans in 2017. As predicted, this forced up premiums for the silver plans, making them “substantially” less attractive to enrollees, according to the report.
“Silver loading increased not only the pre-subsidy premiums in the silver tier but the size of subsidies per enrollee, making coverage in other tiers more affordable than they had been previously,” the report said.
The resulting move to bronze-level plans by some enrollees saved them money on premiums but made them more likely to face higher cost-sharing in the form of copays and deductibles.
“Bronze plans expose consumers with significant health care needs to larger financial burdens than do plans in the higher actuarial value tiers, so consumer advocates are wary of incentives that would increase enrollment in such plans,” the report said. “People with moderate incomes enrolling in coverage with high out-of-pocket costs may be unable to access medical care when needs arise. Additionally, one of the most frequent consumer complaints regarding marketplace coverage has been the relatively high out-of-pocket costs facing many enrollees ineligible for cost-sharing subsidies. Therefore, incentives that increase enrollment in the lowest levels of coverage could increase dissatisfaction with marketplace coverage.”
Complicating the situation, the report added, was the Trump Administration’s decision to cut back on funding to ACA “navigators”—groups that assist customers by explaining the features of the different kinds of plans. Since Trump took office, funding for such groups has fallen from $62.5 million to $10 million annually.
RWJF officials say the lack of funding for consumer assistance may mean that those who choose to switch to a bronze-level ACA plan because of its lower premiums may not realize the tradeoffs they are making.
“One consequence of the Administration’s elimination of cost-sharing subsidies in the ACA marketplace has been a shift toward greater enrollment in bronze plans,” said Katherine Hempstead, senior policy adviser of the Robert Wood Johnson Foundation. “Better enrollment assistance might help low-income consumers choose a plan where high out-of-pocket costs do not reduce the value of the coverage.”
Read more: