Whether the Trump administration will continue funding cost sharing reduction payments is one of the big uncertainties looming over healthcare, with an Oliver Wyman Health analysis finding the decision will have a big impact on 2018 rates, as well as payers' participation in the Affordable Care Act exchanges.
Most health insurers are gearing up for the future by preparing a plan A and a plan B. A nationwide survey in May found that 94 percent of health insurers now offering plans on AAC exchanges intend to remain in the market, while 6 percent are planning on leaving.
But if CSR payments are halted, 42 percent said they'd likely withdraw from the market. The remaining 58 percent said they'd refile their proposed rates, the idea being that payers would likely hike rates to cover the loss of CSR payments.
Designed to mitigate out-of-pocket costs for low-income individuals, CSR is available to ACA enrollees earning 250 percent or less of the federal poverty level. The federal government gives insurers CSR payments to offset the cost of CSR; is paid out $7 billion in 2016, according to Oliver Wyman, and could pay up to $10 billion this year, assuming funding continues.
If funding does not continue, that could spell trouble for certain plans. Those with a lot of CSR-eligible enrollees would likely raise their rates to cover the loss of payments, which could price them out of competition, the analysis found.
More payers are planning those rate increases. In April, 25 percent of payers said they'd increase rates 20 percent or more. Since then, 43 percent said they were planning increases of at least that much.
Regulatory changes don't appear to be having much impact on payer behavior, the analysis showed. The final market stabilization rule, which shortens the open enrollment period and tightens eligibility, resulted in only 14 percent of payers saying the change would affect their pricing. Meanwhile, 57 percent of respondents said the decision to relax the individual mandate -- which stipulates that Americans purchase health insurance or face a fine -- will not affect their rate setting for 2018.