Health insurers have won powerful allies in a fight over federal subsidies that President Donald Trump has threatened to cancel for millions of people who buy insurance through the Affordable Care Act.
A federal appeals court ruled late Tuesday that Democratic state attorneys general favoring the subsidies can join a court case brought by the Republican-led House of Representatives. That three-year-old challenge could determine the fate of those subsidies.
That gives new hope to insurers.
But the ruling hardly resolves the tense uncertainty over the payments that help lower-income consumers meet deductibles and copayments under the Affordable Care Act. That funding is known as cost-sharing reduction subsidies.
Trump could still yank the payments. Insurers can’t count on the money, estimated at $10 billion for next year.Use Our ContentThis KHN story can be republished for free (details).
And consumers are still likely to see high premium increases for 2018 as insurers plan for the worst.
The court decision notwithstanding, Trump’s ability to stop the subsidies “is not diminished,” said Justin Giovannelli, a research professor at Georgetown University’s Center on Health Insurance Reforms. “The administration could still determine that they don’t believe they need to make the payment and will not make the payment.”
The ruling by the U.S. Court of Appeals for the District of Columbia is the latest step in a case that began when Republicans in the House argued Congress hadn’t legally appropriated the money for these subsidies. The cost-sharing reduction subsidies are separate from subsidies offered as tax credits to help consumers pay their marketplace plan premiums. Those tax credits were not part of the suit.
President Barack Obama fought the lawsuit, but the November election handed the reins of the federal government over to a president who has repeatedly promised to “let Obamacare implode.”
That put the Trump administration in the ironic position of defending a suit filed by other Republicans. Many speculated the administration would drop the case, effectively finalizing a district court ruling that found the payments were illegal.
Instead the administration has continued paying the subsidies month to month as it waited for Congress to overhaul the ACA, while repeatedly sowing doubt about whether they would continue.
“If a new HealthCare Bill is not approved quickly, BAILOUTS for Insurance Companies and BAILOUTS for Members of Congress will end very soon!” Trump tweeted last weekend.
Cost-sharing payments, rather than being a bailout, were included in the Affordable Care Act’s blueprint as a way to make insurance more affordable. They lower out-of-pocket costs for about 7 million Americans.
Tuesday’s ruling held that attorneys general led by New York’s Eric Schneiderman and California’s Xavier Becerra can intervene in the appeal against the lower court’s ruling.
That means the case stays alive, even if the Trump administration decides to drop it.
“The case will continue regardless of what the administration can do,” said Timothy Jost, an emeritus law professor at Washington and Lee University who closely follows health policy.
If the administration “decides to stop making the payments, then it’s going to have to do that on its own decision and not hide behind the lower court’s decision,” he said.
That doesn’t do much to reassure consumers and insurers.
Absent any intervention by the courts to keep the funding while litigation proceeds, carriers would have to crank up premiums of medium-level plans — commonly known as silver plans — an extra 19 percentage points on average to recoup lost cost-sharing funds, independent experts project.
The tax credits that reduce what consumers pay in Obamacare premiums could help middle- and lower-income families cover much of the difference. But somewhat higher-income consumers — a household of three making more than $85,000, for example — could be directly exposed to new ACA sticker shock.
Amid all the uncertainty, insurers are running out of time to plan for next year. Many have dropped out of the market, citing losses as claims for medical care exceeded their expectations.
Others are filing for double-digit premium increases for 2018, in many cases assuming the cost-sharing subsidies will disappear, said Sabrina Corlette, also at Georgetown University’s Center on Health Insurance Reforms.
“We’re at a bit of a tipping point of where things could go. They have to finalize rates by Aug. 16,” she said. “Without certainty on the cost-sharing reductions, most are going to assume that they’re not going to be paid, and that’s as much as a 20 percent rate hike.”
Bill Daitchman got some bad news this week: His insurer is breaking up with him.
Daitchman and his wife, who own a graphic design business in Santa Cruz County, each pays $350 a month for a health insurance plan from Anthem Blue Cross on the Covered California exchange. But Anthem announced Tuesday it’s pulling out of most of the state’s individual markets, citing the uncertainty swirling around the Affordable Care Act.
And that vexes Daitchman, 59. First, there’s the possibility that a new insurer will charge more for coverage. Second, he has kidney disease. Will he lose the doctors who know him and his needs? He’s especially reliant on the nephrologist he’s seen since 2006.
“Invariably when you lose policies, you lose those relationships,” said Daitchman. “You get what’s available at that point. You get the doctors they offer.”
The move by Anthem, the nation’s second-largest health insurer, means about 153,000 Californians like Daitchman, who buy insurance on the California exchange, must look for new plans for 2018. That’s more than 10 percent of Covered California’s total enrollment of 1.4 million. Fewer than half of Anthem policyholders on the exchange — about 108,000 customers in the California marketplace — will still be able to renew their Anthem policies.
Anthem has been making similar moves in other states, citing changing federal rules, a shrinking market for individual insurance and an overall lack of marketplace predictability. The company has already announced it will exit the ACA exchanges next year in Ohio, Indiana and Wisconsin, three of the 14 states where it sells exchange plans. The insurer also plans to reduce its exchange presence in Nevada.
In California, the insurer’s decision marks a significant turnabout.
Anthem led the state exchange in enrollment during its first two years, starting in 2014 with 30 percent of enrollees. Now its share of the market has dwindled to 19 percent, state officials said Tuesday, and that could plummet to single digits next year as exchange policies are canceled.
Anthem had long sold policies across the state, from large markets such as Los Angeles to rural mountainous counties like Inyo and Mono, which often had few insurers to choose from.
But next year Anthem will sell to individuals only in about half of California’s counties, including Santa Clara, San Joaquin, Stanislaus, Merced, Tulare, and most of the region north of Sacramento up to the Oregon border. Many of these markets are the least populous, limiting the insurer’s financial risk.
“This was not an easy decision for us,” Brian Ternan, president of Anthem Blue Cross in California, said in a message posted online.
“The market for these plans has become unstable,” Ternan wrote. “And with federal rules and guidance changing, it’s no longer possible for us to offer some of those plans.”
In an email, company spokesperson Tony Felts explained that planning and pricing affordable health plans “has become increasingly difficult” amid uncertainty about such things as the availability of cost-sharing subsidies for low-income marketplace enrollees.Use Our ContentThis story can be republished for free (details).
Anthem’s pullback also likely means that tens of thousands of individual policyholders outside the state exchange will have to find new plans next year. But the retreat does not touch the company’s other insurance customers, such as people with Medi-Cal, Medicare or employer-based plans.
Many Wall Street analysts and investors cheered Anthem’s retreat in California. Ana Gupte, a health care analyst at Leerink Partners, said these “surgical extractions” minimize the risk that potential losses from exchange plans drag down overall profits. Big insurers also increasingly sense more opportunity and growth in other government markets, such as Medicaid managed care and Medicare Advantage plans.
Anthem’s two biggest competitors, UnitedHealth and Aetna, had already announced their exits from most Obamacare marketplaces nationwide.
Even with Anthem’s retrenchment in California, the Golden State will remain more competitive than many others. For 2018, Covered California said more than 82 percent of consumers will have more than three plans to choose from and 96 percent will have at least two insurers to pick from.
Covered California Executive Director Peter Lee said the state exchange “played a very active role” in encouraging Anthem to stay in three of California’s 19 insurance regions.
Lee said the insurer must be able to make money to stay in the marketplace in the long run.
“Anthem was in a position … to pause and take a step back,” said Lee. “We hope they’ll step back forward in future years.”
Lee emphasized that California’s marketplace is still “viable and competitive,” with all 11 insurance carriers this year set to participate next year, if not to the same extent as before.
Covered California staff members will help Anthem enrollees find new plans, Lee said, and some may be able to keep their doctors. Eighty-four percent of Anthem’s providers are available through other insurance products, he said.
Health insurance expert Shana Alex Charles noted that the areas where Anthem is pulling out have a lot of competition. Some have six or more health insurance carriers.
“It is just another reminder that we are dealing with for-profit businesses,” said Charles, assistant professor in the health science department at California State University-Fullerton. “Businesses want less competition. They want to be the only players in the market.”
California Healthline Senior Correspondent Chad Terhune contributed to this story.
KHN’s coverage in California is funded in part by Blue Shield of California Foundation.