Benefits Buzz

CSR Subsidy Key in Escalating Efforts Once Again to Repeal and Replace the ACA

Posted on April 5th, 2017

You’ve all heard by now that Congress was unsuccessful in passing the American Health Care Act (AHCA), a bill that was intended to repeal and replace significant parts of the Affordable Care Act (ACA). Surely, within time, there will be another bill introduced to change the ACA, but that could take time. It may be weeks, months, or maybe even not until next year, although President Donald Trump does have a “wild card” he can use. That wild card relates to how he handles an issue with cost-sharing reduction (CSR) subsidies, and it could escalate efforts to repeal and replace the ACA depending how he chooses to proceed.   
 
First, what are CSR subsidies? CSR subsidies are available to eligible people who enroll in coverage through an Exchange, and they help these individuals lower their deductibles, copays and other out-of-pocket expenses. Through the CSR subsidy program, the federal government pays money to insurance companies to reduce the out-of-pocket expenses for these qualifying individuals. It’s estimated somewhere around 6 million people are receiving CSR subsidies at an expected cost to the federal government of $9 billion for 2017.  
 
Secondly, how are the CSR Subsidies a wild card for Trump? Last year, House Republicans filed a lawsuit against the Obama administration which contended they were illegally funding the CSR subsidies, and they won. A literal interpretation of the law states that CSR subsidy funds must be appropriated by Congress, meaning Congress must specifically allocate funds for CSR subsidies within the federal government’s budget, and Congress never did this.     
 
The Obama administration argued the intent of the law was that these funds would be automatically allocated, but the actual text of the law says otherwise, and the court sided with the House Republicans. However, the judge stayed the ruling (i.e. put the ruling on hold) knowing the Obama administration would appeal, and they did appeal. The expected date for the appeal hearings to resume is May 22, 2017…. but here’s the thing.
 
The Obama administration no longer exists. They’ve been replaced by the Trump administration, and the Trump administration could withdraw the appeal. That would mean the CSR subsidies would be eliminated, adding volatility to an already volatile individual market, unless Congress acted to appropriate funds. Trump could force health care issues to be revisited more quickly by withdrawing the appeal, but we’ll have to wait and see if he plays his wild card.     
 
 

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