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What are cost-sharing reductions, and what happens if Trump ends them?

President Donald Trump
Gage Skidmore
Flickr - http://bit.ly/1rFrzRK
President Trump has threatened more than once to stop the federal health insurance subsidies known as cost-sharing reductions.

The Michigan Department of Insurance and Financial Services announced Tuesday that it won a 30-day extension to publish proposed health insurance rate hikes, citing "uncertainty" over whether insurers will be reimbursed for providing required financial assistance to low-income consumers who purchase insurance through the individual marketplace.

That uncertainty has increased recently as President Trump continues to threaten to end federal health care subsidies, called cost-sharing reductions, which help low-income Americans pay for health insurance.

Cost-sharing reductions, or CSRs, are designed to assist those that don’t qualify for Medicaid, but cannot fully afford deductibles or out-of-pocket costs of insurance plans offered through the individual marketplace.

But instead of going straight to consumers, the subsidies are paid by the federal government to insurance companies. When a qualified individual can’t afford a deductible or out-of-pocket expense, their insurance company pays the difference, knowing there will be a government reimbursement.

The subsidies cost an estimated $7 billion in 2017 and cover more than 7 million Americans.

Health experts predict that if the president stopped these payments, premiums would rise dramatically, and the resulting instability could cause some insurers to withdraw from the individual marketplace altogether.

Credit Kaiser Family Foundation
Kaiser Family Foundation
This chart shows state-by-state premium rate increases that would compensate for the loss of CSRs. Rates in Michigan would increase by around 15%.

It is unclear whether the Trump administration will follow through on the threats. Meanwhile, many lawmakers are calling for a bipartisan plan to stabilize the ACA markets, which would include guaranteeing CSR payments.

Premium rates are expected to increase in 2018 regardless of the status of CSR payments. But a move to end payments by the White House would push rates up even more.

Nine insurance companies want to participate in the federally-run Michigan Health Insurance Marketplace.

Rick Notter is the director of individual business for Blue Cross Blue Shield of Michigan. He says that like other health care companies in the state, Blue Cross has proposed two different premium rate increases to the state for 2018: a lower rate increase based on the assumption that the company will receive CSR payments, and a higher increase if they do not.

If the White House does not announce its decision within the 30-day extension period, the state will have to choose which rates to move forward with, despite any remaining uncertainty.

“And at this point, my assumption would be those would be the higher rates because of all the things that have been said about pulling [CSRs] away,” Notter told Stateside’s Cynthia Canty.

The Trump administration is expected to announce a decision on CSR payments sometime this week. Regardless, the new rates won't be made public to Michigan consumers until September at the earliest.

The ACA open enrollment for 2018 begins Nov. 1 and continues through Dec. 15.

Emma is a communications specialist with the digital team at Michigan Radio. She works across all departments at Michigan Radio, with a hand in everything from digital marketing and fundraising to graphic design and website maintenance. She also produces the station's daily newsletter, The Michigan Radio Beat.
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