Tag Archives: CSR subsidy

Substantial amount of ACA plans’ revenue comes from cost-sharing payments

Politico Pulse cited a new study performed by Milliman that examines cost-sharing reduction (CSR) subsidies under the Patient Protection and Affordable Care Act (ACA). The study was commissioned by the Association for Community Affiliated Plans.

Here’s the excerpt from the morning briefing:

FIRST IN PULSE: COST-SHARING SUBSIDIES ARE A SIGNIFICANT SHARE OF OBAMACARE REVENUES — Cost-sharing subsidies accounted for 7.8 percent of health plan revenues for customers enrolled in Obamacare plans in 2015, according to a new study commissioned by the Association for Community Affiliated Plans.

The study conducted by Milliman also found a huge discrepancy between states that expanded Medicaid and those that didn’t. Cost-sharing subsidies accounted for 4.8 percent of revenues in expansions states, but that share more than doubled in states that didn’t expand coverage. The amount of money at stake: $4.9 billion in assistance to 5.2 million exchange customers in 2015.

Why it matters: The future of the cost-sharing subsidies is in limbo. House Republicans sued to block the funding and won an initial court battle. But they’re being pushed by health plans to continue the payments now that they’re in control of the federal government. Otherwise, insurers warn, the Obamacare markets could collapse on their watch. “The loss of CSR payments in 2017 would trigger significant losses for many insurers in the individual market,” the study concludes. Read the report here.

Cost-sharing reduction payment implications

In their article “CSR subsidies: Intra-year emergence,” Milliman’s Aaron Wright and Shyam Kolli assess the difference between prospective payments from the Centers for Medicare and Medicaid Services (CSM) and actual cost-sharing reduction (CSR) payments. They also discuss the effects that payments may have on quarterly financial statements for some carriers.

Cost-sharing reduction subsidies: Financial impact of the simplified methodology

The Patient Protection and Affordable Care Act (ACA) introduced two subsidies for low- and moderate-income individuals to help make health insurance more affordable. These include premium subsidies to lower the initial purchase price of a policy and cost-sharing reduction (CSR) subsidies to lower the cost sharing (e.g., deductibles, copays, etc.) absorbed by individuals at the time they receive care. CSR subsidies, however, are administered in a complicated manner. In many cases the federal government may not reimburse the full cost, leaving the remainder on the shoulders of health insurance companies.

This Healthcare Reform Briefing Paper by Daniel Perlman and Jason Siegel outlines the design of the CSR subsidies under the ACA and its implementing regulations. The paper also describes how, depending on the reimbursement methodology agreed upon between issuers and the federal government, the regulations as currently written may under-compensate issuers of silver-level plans. Issuers should consider the scenarios described in this paper when choosing one of the CSR reimbursement methodologies allowed by the federal government.