Covered California Analysis Shows Yuge Price Increases If Trump Plan Implemented

SACRAMENTO, Calif. — A new analysis shows the dramatic consequences facing Californians if federal policies are changed from the current structure and there is no longer direct federal funding of cost-sharing reduction (CSR) reimbursements and the individual shared responsibility payment is not enforced when a consumer chooses not to purchase coverage.

The analysis found that Covered California health plan premiums could rise up to 49 percent if two key elements that have been in place for the past four years are changed: Cost-sharing reduction reimbursements are no longer directly funded as reimbursements to carriers, and the shared individual responsibility payment is not enforced.

• California’s premiums could rise by 28 to 49 percent in 2018, and up to 340,000 consumers could lose individual market coverage if changes are made to existing federal policies.
• The potential rate increase would mean billions of dollars in additional federal spending. The 1.2 million consumers who do not receive subsidies would bear the entire brunt of these increases.
• The potential decrease of 340,000 insured consumers would not only represent many individuals losing access to potentially life-saving care, but it would result in a sicker risk mix in the individual market and higher premiums for everyone.

“California and the majority of markets across the nation are stable and working right now, but the possibility of changing the rules of the industry is threatening to upend markets and put consumers at risk,” said Peter V. Lee, executive director of Covered California. “This specter of uncertainty could lead to dramatically higher rates, but there is still time to take the concrete steps necessary to keep the marketplaces stable and preserve coverage for millions of people.”

The analysis, commissioned by Covered California and conducted by PricewaterhouseCoopers (PwC), also found that without CSR reimbursements and enforcement of the individual responsibility payment (sometimes called the individual mandate or individual penalty), up to 340,000 Californians would drop from coverage in the individual market in 2018.

“Failure to support cost-sharing reduction subsidies results in significant increases in premiums, in particular for unsubsidized Silver plans. Fewer people would participate with these higher premiums, which would lead to a drop in coverage in the unsubsidized market,” said Sandra Hunt, principal at PwC.

“Our analysis also highlights the critical importance of enforcing the individual mandate,” continued Hunt. “If federal policy were to change and the individual mandate were not enforced, not only would premiums rise significantly, but up to 340,000 could lose health coverage.”

In addition, a previous analysis conducted by Covered California found that due to a requirement for carriers to build cost-sharing reduction payments into premiums, discontinuing funding directly to carriers would result in increased federal spending. Costs would rise by more than $4 billion in 2018 alone, and tens of billions of dollars would be added to the federal budget over 10 years.

“Because of the interplay between rising premiums and premium subsidies, the federal government would end up paying tens of billions of additional dollars if they do not fund the cost-sharing reduction subsidies,” said Lee. “There is no logic to not funding cost-sharing reductions. They achieve two important goals: They help low-income consumers afford health care, and they allow the federal government to spend less.”

Lee urged the federal government to provide clarity on these issues as soon as possible, since health plans are finalizing rates that need to be locked down by June 15, 2017.

“Stopping the funding of CSR reimbursements, or even leaving the payments up in the air, would mean carriers would raise their prices to account for the uncertainty — costing the federal government billions in higher subsidy payments,” Lee said. “Even more important is the enforcement of the penalty, which boosts enrollment, builds a healthier pool of consumers and lowers premiums for everyone.”

The high potential rate increases would lead to hundreds of thousands of subsidized individuals deciding to go without insurance. For those who decide to keep their coverage, they would likely face relatively little impact, since their federal subsidies would also increase. The 1.2 million Californians on the individual market who do not receive subsidies, both in Covered California and off exchange, would pay the full cost of any premium increases.

“While Californians face significant uncertainty, in many other parts of the nation the premium increases would be far larger, and it is possible that many areas would have no health plan offering coverage in the individual market,” Lee said. “The cost of inaction or indecision is high and consumers, particularly those who do not get any financial help, will end up bearing the cost.”