Cutting off CSR subsidies will hit red state enrollees especially hard
As Republicans gear up to repeal the ACA, the Kaiser Family Foundation has helpfully broken out how many of the 9.4 million subsidized enrollees in the ACA marketplace (as of March 31) live in each state, and what share of an estimated $32.8 billion to be paid out in premium tax credits this year will be paid out for enrollees in each state.
Greg Sargent, assessing the potential political fallout of cutting off those subsidies, notes:
Some of the states with the highest populations of people getting subsidies are represented by GOP Senators. This includes Florida (more than 1.4 million); Texas (more than 913,000); North Carolina (more than 499,000); Georgia (more than 427,000); and Pennsylvania (more than 321,000). Many other states with GOP senators also have sizable populations getting subsidies.
Today also happens to be the day when a federal appeals court delayed further proceedings in House Republicans' suit to stop the executive branch from funding the Cost Sharing Reduction (CSR) subsidies that reduce out-of-pocket costs for 57% of marketplace enrollees. Since a lower court upheld the suit in May, but stayed any action to cut off the payments, the delay effectively leaves it up to the Trump administration whether to drop the Obama administration's appeal and thus cut off those subsidies, effectively crippling the marketplace instantly* (and disrupting Congressional Republicans' alleged "repeal-and-delay" plans, which would keep the marketplace functioning until a replacement plan is enacted).
It therefore seems appropriate to note that CSR subsidies are particularly prevalent in the 19 states that have refused to enact the ACA's Medicaid expansion -- most of which are Trump country. That's because in those states, a subset of those whom the ACA intended to make eligible for Medicaid, people with incomes between 100% and 138% of the Federal Poverty Level (FPL), are instead eligible for subsidized marketplace coverage. And since they are in the lowest income bracket eligible for subsidized marketplace coverage, they get the highest level of CSR support for the lowest price.
Subsidized marketplace enrollees with incomes below 138% FPL (who "should have" been Medicaid-eligible) pay just 2% of their income for a CSR-enhanced silver plan, which has an actuarial value of 94%, meaning that it's designed to cover 94% of the average enrollee's yearly medical costs. In states that expanded Medicaid, marketplace eligibility begins at 138% FPL, and a much smaller percentage of enrollees, those with incomes from 138-150% FPL, get AV 94% silver. And they have to pay more for it -- 3-4% of income.
Of the five states spotlighted by Sargent, four -- Florida, Texas, North Carolina and Georgia -- have refused to expand Medicaid. In those states, the percentage of enrollees who obtain CSR subsidies is high -- 73% in Florida, 59% in Texas, 66% in North Carolina, and 67% in Georgia.
The percentage of enrollees in those states who get the highest level of CSR, raising the AV of a silver plan to 94% (and usually keeping the deductible in the $0-250 range), is also high.. Among enrollees with CSR-eligible incomes 65% in Florida are eligible for AV 94% silver, as are 65% in Georgia, 58% in Texas and 57% in North Carolina.
CSR remains strong for those in the next highest income bracket, 150-200% FPL, raising the actuarial value of a silver plan to 87% from its baseline of 70%. It fades to near-insignificance in the next bracket, 200-250% FPL, and phases out entirely at 251% FPL. In states that refused the Medicaid expansion in particular, the vast majority of CSR recipients, about 90%, get "strong" CSR, with AV 94% or 87%. In Florida, Texas, North Carolina and Georgia, well over half of all marketplace enrollees obtain strong CSR, AV 94% or 87% -- that is, coverage with a higher actuarial value than the average employer-sponsored plan.
Republican "replacement" plans such as Tom Price's not only offer smaller premium subsidies than the ACA, generally not adjusted for income -- they also offer those subsidies in a deregulated market, in which most plans sold are likely to have actuarial values below 70%, the level of the ACA's benchmark silver plans un-enhanced by CSR. The majority of current red-state marketplace enrollees will likely have to pay higher premiums for plans that cover far lower percentages of their out-of-pocket costs. If that's how events play out, CSR will deserve an important chapter in ACA enrollees' Remembrance of Things Past.
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* As Ken Kelly reminds me, insurers are obligated to provide CSR to qualifying plan holders even if the federal government doesn't fund the benefit. But without funding, they also can arguably withdraw from the marketplace in 2017. If they don't, some may be driven into insolvency -- basically none could cover CSR without huge losses. Timothy Jost lays out the various chaos scenarios here.
Related:
The Tom Price Slice: Cutting the government's share of healthcare costs
The ACA's uncertain shield against underinsurance: A CSR compendium