The Trump Administration is due to make another monthly cost-sharing reduction (CSR) payment to insurers by May 21, but it remains unclear whether that payment, or any future payment, will be made. Last week, the White House notified Congress that they would continue to fund the ACA’s CSR program, albeit they did not indicate for how long they intend to continue funding. But earlier this week, Office of Management and Budget Director Mick Mulvaney made conflicting statements about whether they would continue making payments to insurers, stating both that they would make this month’s payment while future payments were undetermined, and that they “have not made any decisions at all on May.” As the administration approaches that deadline, it must also decide by May 22 whether it will continue its appeal of House v. Price, the lawsuit challenging the validity of the CSR payments.
The CSRs help offset out-of-pocket expenses for silver-tiered plans purchased through the marketplaces, for households with incomes up to 250% of the federal poverty level. The subsidies are paid indirectly, as insurers reduce their costs for eligible consumers and in return receive monthly payments from the federal government to make up the difference. The CSR subsidies are separate from the ACA’s larger advanced premium tax credits. The administration has been appealing a ruling last May by U.S. District Court Judge Rosemary M. Collyer in favor of Congress, which charged that the payments were not properly funded and are therefore illegal and unconstitutional by violating Congress’s constitutional spending powers. In February, the administration was granted until May 22 to consider whether to continue defending the lawsuit.
There are effectively four possibilities for the program’s future:
- The Trump Administration continues its appeal of the House v. Price lawsuit, arguing on behalf of the position that the CSR program is properly funded; in which case, the CSR payments are allowed to continue so long as the appeal process continues and the administration continues to send payments to insurers.
- The Trump Administration continues its appeal of the lawsuit but nevertheless decides to cease making payments to insurers.
- The Trump Administration drops its appeal of the lawsuit, effectively taking the position of House Republicans that the CSR program was not properly funded; in which case, the ruling of Judge Collyer takes effect and all federal funding for the program must cease immediately.
- Congress appropriates the estimated $7 billion annual funding for the program and this is signed into law by President Trump; in which case, the lawsuit becomes moot as funding for the program is congressionally authorized.
In any case, if the CSR program funding is not made to insurers, the insurers would still be required to provide the subsidy amounts owed to individuals—an amount of roughly $7 billion annually across all insurers. This has the potential to dramatically destabilize the marketplaces as it could result in many insurers opting to immediately withdraw from the marketplaces and leaving millions without coverage. Several insurers have already publically stated that they would immediately pull out of the marketplaces should this occur, including a statement last week by Molina Healthcare, which has more than 600,000 marketplace customers.