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CSR Loss, Rising Employment May Hurt Health Plans

Analysis  |  By Gregory A. Freeman  
   September 13, 2017

The loss of cost sharing reductions could force health plans to raise premiums so much that silver plan customers opt instead for bronze.

Governors from five states are calling on President Donald Trump to continue the cost sharing reductions (CSRs) to help stabilize the health insurance market, while analysts are determining how the loss of the subsidies would affect the market.

One expected result: Health plans will suffer more if the individual mandate is not enforced.

Losing the subsidies would exacerbate existing challenges to health plans by pushing some consumers to buy down to bronze plans, one analyst says, and the problems for health plans worsen if the government stops enforcing the individual mandate.

On top of that, higher employment could further reduce the population of the individual market.

Governor Bill Haslam (R-TN) told the Senate Health, Education, Labor and Pensions Committee recently that he and other governors have not given up on the idea of saving the current insurance structure.

But the subsidies are necessary to keep the insurance market stable, especially if wider reform is not coming any time soon.

"Some may say the only way to ensure legislative action on cost and realize real reform is total collapse," Haslam said.

"I don't subscribe to that line of thinking. I think every governor here and those back at home believe we can move to stabilize the market now while we work to take on the issue of health care costs."

Waiting for the White House

Insurers must file their 2018 rates by Sept. 20, and the Trump administration has not committed to any long term continuation of the CSRS, which help health plans offer lower cost coverage to low income consumers.

Uncertainty over the CSRs, and the possibility of losing them for good, is leading some insurers to hedge their bets by raising premiums even more than they might otherwise.

The government will end up paying higher tax credits to eligible consumers when silver plan premiums increase, partially negating any possible savings, notes Ken Wood, senior vice president of health plan development for Evolent Health, which works with health plans and health systems to promote value-based care.

"The unfortunate consequence is that people who don't have that tax credit will just have to pay the higher premium for the silver plan, and that means many of them will have to decide whether to buy down to bronze," Wood says.

Prediction: Healthcare Coverage Will Drop

"Healthier people will buy down to bronze, and if the individual mandate is not enforced some of them will leave the pool. That will mean further pressure on health plans because they will be left with a smaller, sicker population in the market."

Wood says health plans should be as worried about the individual mandate as CSRs, because he expects many people to drop coverage if the mandate is not enforced. Families may decide to insure a sick child but not the parents, for instance, or individuals may wait until they need care before purchasing coverage.

The improvement in unemployment figures also could have a detrimental effect on health plans, compounding the problem further. The individual health insurance market has always been counter-cyclical to employment, Wood explains, so when employment is high there are fewer people looking for individual coverage.

"We're getting closer to full employment at the peak of the cycle, where fewer people are left in the individual market. This lower enrollment comes at a time when higher premiums are giving people an incentive to buy down or drop of the market entirely," Wood says.

"It puts a bit more pressure on the pools, at a time when they don't need any more challenges."

Gregory A. Freeman is a contributing writer for HealthLeaders.

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