CBO: Ending Obamacare cost-sharing subsidies would raise premiums and the deficit

Discussion in 'Politics, Religion, Social Issues' started by Rhonindk, Aug 15, 2017.

  1. Rhonindk, Aug 15, 2017
    Last edited: Aug 15, 2017

    Rhonindk macrumors 68020

    Rhonindk

    Joined:
    Oct 3, 2014
    Location:
    Bloom County: Meadow Party
    #1
    Been waiting on this one for a while now ...

    CBO Doc
    Reuters
    FOX
    CNN


    Got some more reading and understanding to do. I am a bit baffled and maybe one of the Financial folk here can better interpret.
    Premiums are going up drastically pretty much nation-wide anyway.

    The CBO is saying it. I am having trouble seeing how they arrived at these numbers taking the known into account. Most premiums are raising higher than the CBO derived number (20%) even if Trump does nothing.

    More to come...

    Update 1:
    This would be happening anyway unless someone thinks the states are picking this up? Not seeing where this is coming from as the states will be looking more and more for federal help or continued help. Not seeing this as "new" deficit.
     
  2. Zombie Acorn macrumors 65816

    Zombie Acorn

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    #2
    So because premiums are assumed to go up they have to issue more premium credits vs shelling money out to the companies to keep them from collapsing?
     
  3. Carnegie macrumors 6502

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    #3
    If you're asking whey premiums would rise, the reason is pretty straight forward. I haven't read the CBO report yet, but I suspect its reasoning is more or less this...

    As it is, silver level plans are required to have an actuarial value of 70%. That means that, on average, the out-of-pocket provisions of those plans have to be set such that the coverage provider would be expected to have to pay, on average, 70% of the costs of the health care provided to those covered. So the deductible might be set at $5,000 and co-pays might be set at $50 or whatever. Premiums are set based on those terms and the resulting expected benefits costs.

    For certain lower-income people, however, the actuarial value of those same plans is required to be higher - as high as 94%. The way a coverage provider achieves that higher actuarial value is by, e.g., reducing the deductible or the co-pays. It couldn't afford to do that and keep the premiums the same unless the difference was being made up somehow. The PPACA, along with requiring coverage providers to change the terms of certain policies as I've just described, also provides that the government will make payments to those coverage providers to effectively make up that difference. So, to the coverage provider, the actuarial value of the policies isn't really changed - it's just a matter of who is, in effect, paying for portions of the out-of-pocket costs. From the perspective of lower-income people, the actuarial value is higher because the government is effectively subsidizing their out-of-pocket costs.

    If the government is no longer paying that subsidy on behalf of lower-income people, and yet the coverage providers still have to change the terms of the policies (such that they have to pay more of the health care costs), then those coverage providers have to raise premiums. Otherwise, they'd be losing money. The premiums wouldn't be high enough to cover their costs. They'd, in effect, be selling people gold and platinum (or higher) level plans at silver level prices.

    There's another aspect of the situation. The same people for whom this actuarial value adjustment has to be made are people who qualify for tax credits to help cover the costs of their premiums. The way those credits work is that the amount of premium which they pay themselves is determined by their income and other factors. It doesn't matter how high premiums (for silver level plans) go, their share remains the same. Whatever increase in premiums resulted from the government no longer paying the cost sharing subsidies would, under the law, be paid by... the same government that was no longer paying those cost sharing subsidies.

    This concern is already having an effect on the non-group coverage market. Coverage providers are, in addition to premium increases which might otherwise result, already having to factor in the risk that these cost sharing subsidies won't be paid. Further, some coverage providers are withdrawing from certain markets and alluding to that concern - the uncertainty involved - as one of the reasons.
     
  4. Rhonindk thread starter macrumors 68020

    Rhonindk

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    #4
    Thanks for the detail ... good stuff. What I am concerned about is that premiums are already targeted to go up substantially. Is this on top of that already "scheduled" rate hike or is the increase part of these numbers. Either way, I was unable to find where or if the CBO's numbers accounted for or included it.
     
  5. Carnegie macrumors 6502

    Joined:
    May 24, 2012
    #5
    You're welcome.

    This estimated increase is relative to the CBO's baseline estimates for premiums in future years. So it's in addition to however much the CBO has already estimated that premiums will go up in future years.

    Just to be clear though: We're mostly talking about effects on (non-group, exchanged-sold) silver level plans. After a brief period of uncertainty when coverage providers would be trying to sort out the effects of this change, the CBO estimates that it wouldn't much affect premiums for bronze or gold level plans. Those plans don't get the out-of-pocket cost subsidies (and actuarial value increases) that silver level plans do. But the premiums for silver level plans would increase even for those who don't qualify for those out-of-pocket cost subsidies. So, many who don't receive premium subsidies would choose bronze or gold level plans over silver level plans.

    Silver level plans would be silver level in name only. Their terms (e.g. deductibles and co-pays) would be those of gold or platinum level (or higher) plans, and so would their premiums. From the perspective of certain low-income people, that's much the case already as the government is paying both premium subsidies and out-of-pocket cost subsidies. With this change, the government would be paying much the same (or more) in subsidies, but all of that subsidization would be considered premium help rather than out-of-pocket cost help. For those who don't qualify for premium subsidies, silver level plans would have gold or platinum level premiums but would still have silver level terms. That's why the CBO expects most of them to choose different plans.
     
  6. Rhonindk thread starter macrumors 68020

    Rhonindk

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    #6
    That helps - Thx!
     

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