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Also on October 12, the Trump Administration indicated it will stop paying cost-sharing subsidies immediately to insurance carriers in the Marketplace.
The cost sharing subsidies are available to individuals making 250% or less of the Federal Poverty Level (FPL). They are designed to fund lower out of pocket cost for these lower-income individuals. Insurance carriers that offer a silver plan in the Marketplace are required to offer 3 variations of that plan for individuals that qualify for cost sharing subsidies. The variations have lower cost-sharing than the standard silver plan option. This is required by the ACA. The government reimburses the insurance carrier for the cost associated with the lower cost payments in the form of subsidies.
The Trump administration ended the subsidies, but insurance carriers are still obligated to offer the 3 other plans with lower cost sharing. Carriers anticipated the loss of these subsidies and submitted two sets of rates for approval by the Marketplace. The rates assuming no cost-sharing subsidies are approximately 20% higher.
It is important to note, the premium subsidies are unaffected. If an individual qualifies for a premium subsidy, the cost for coverage under the second lowest cost silver plan is set a percentage of the individual’s household income. The Federal government pays the remaining premium. The 20% premium hike will be paid by taxpayers for those that receive premium subsidies. Accordingly, the by ending the cost-sharing subsidies, the Federal government will likely pay more to supplement the individual’s premium, rather than splitting the difference with the insurance companies. Approximately eighty-five percent of individuals purchasing coverage in the Marketplace receive a premium subsidy. Premium subsidies can still trigger employer mandate penalties.
The cost-share offsets are authorized by statute but payments are not appropriated annually, which was challenged by former Speaker of the House John Boehner in a lawsuit that is still ongoing. That lawsuit is currently being appealed, and several states have intervened and defended the subsidies. Those states will likely argue that the Trump Administration’s decision to stop paying the subsidies is invalid. Additionally, State Attorneys General from Kentucky, Massachusetts, Connecticut, California and New York have filed a separate lawsuit challenging the Administration’s decision.