How Would Coverage, Federal Spending, and Private Premiums Change if the Federal Government Stopped Reimbursing Insurers for the ACA's Cost-Sharing Reductions?

Elimination of federal cost-sharing reductions could increase marketplace spending by 18 percent or increase the uninsured by 9.4 million, depending on insurer response.

The Issue

The Affordable Care Act (ACA) requires insurers to provide cost-sharing reductions (CSRs) that lower deductibles, co-payments, co-insurance, and out-of-pocket maximums for people eligible for tax credits and with incomes below 250 percent of the federal poverty level. With current policy uncertainty surrounding these CSRs, there are multiple future scenarios, but all involve increases in insurance premiums for consumers and there is a potential for large reductions in the insured population.

Key Findings

The report analyzes three potential scenarios and outcomes:

• Insurers have enough time before the start of the plan year to incorporate their anticipated CSR costs into a surcharge placed on silver plan premiums.
• Insurers exit the marketplaces in response to the loss of CSRs and other policy uncertainties and changes.
• The federal government does not reimburse insurers for CSRs and lawmakers alter the ACA so that insurers are no longer required to pay CSRs to eligible enrollees.

Conclusion

In 2018, the number of uninsured Americans could increase by 9.4 million, and average premiums could increase by nearly 37 percent, if insurers abandon the marketplaces because of a decision to eliminate federal reimbursement of health insurance CSRs.

About the Urban Institute

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