Last night, President Trump indicated that the US Treasury would no longer make payments for the Affordable Care Act’s (ACA) cost-sharing reductions (CSRs), leaving Congress to decide whether the payments will be appropriated and paid. These subsidies to insurers lower deductibles, coinsurance, and copayments for Marketplace enrollees with incomes below 250 percent of the federal poverty level.

Absent legislative action, insurers participating in the Marketplaces will be required to continue providing the subsidies to eligible enrollees, even though the federal government will not reimburse the insurers.

In September, we used three possible scenarios to analyze the coverage, premium, and federal government spending implications if these payments ended:

1. Insurers build the costs of these subsidies into their silver-level Marketplace premiums, a scenario consistent with instructions some states made to their insurers for 2018.
2. Insurers exit the Marketplaces to avoid the financial losses associated with nonreimbursement of their expenses.
3. Congressional legislation that permits insurers to sell coverage in the Marketplaces without providing cost-sharing subsidies to low-income enrollees (the least likely scenario to occur).

The main findings at the national level are as follows (the report provides state-by-state findings):

Scenario 1

If all insurers nationally incorporated their anticipated CSR costs into a surcharge placed on silver Marketplace premiums for 2018 and remained in the Marketplaces, the surcharge would increase silver premiums 23 percent, on average.

About 600,000 more people would enroll in Marketplace coverage because the premium surcharge on silver plan premiums would automatically increase federal payments for premium tax credits. These tax credits are tied to the second-lowest-cost silver Marketplace premium in each area. As the premium tax credits become more generous for people eligible for them, some people previously eligible for tax credits but not using them will newly decide to enroll, reducing the number of uninsured modestly. But the federal government would spend 18 percent more on premium tax credits than it would have spent on tax credits and CSRs combined under current law, an additional $7.2 billion in 2018.

Scenario 2

If all insurers exit the Marketplaces in response to the loss of CSRs and other policy uncertainties and changes, the number of uninsured people would increase by 9.4 million, enrollment in the private nongroup market would decrease 57 percent, and nongroup premiums would rise 37 percent, on average.

Eliminating the tax credits and CSRs would reduce federal spending on this assistance by $40.7 billion in 2018.

Scenario 3

If lawmakers alter the ACA in response to the elimination of CSRs such that insurers are no longer required to pay CSRs to eligible enrollees, 4 million more people would be uninsured, and nongroup premiums would rise 12 percent, on average. But it is extremely unlikely that Congress would do this.

The Congressional Budget Office (CBO) also estimated the national implications of a cessation of federal CSR payments, assuming insurers would have sufficient time to adjust their premiums before implementation. Under that assumption, the CBO estimates 5 percent of the population would live in areas where insurers would, at least in the first couple of years, behave consistent with scenario 2.

The CBO assumed that the most common result would be scenario 1. But a sizable fraction of states instructed insurers to set 2018 premiums as if the federal government would continue paying insurers for cost-sharing reductions. More markets than the CBO anticipated may resemble scenario 2, leading to more people becoming uninsured than they estimated, at least in the next couple of years.

The analysis described here was done by Urban Institute Health Policy Center researchers Linda J. Blumberg, Matthew Buettgens, and Robin Wang.