The Centers for Medicare and Medicaid Services recently issued the Notice of Benefit and Payment Parameters for 2020, which finalized a harmful provision first proposed in January that would effectively reduce the amount of premium tax credits available to purchase marketplace plans over time. Like prior Administration actions that have sabotaged the marketplaces, this would make coverage less affordable and add to the ranks of the uninsured.
According to the Administration’s own estimates, the provision would cut marketplace subsidies by $980 million in 2020 and by $4.26 billion over four years, relative to prior law. It would also increase the premiums paid by families by about $181 million per year and reduce marketplace enrollment by about 70,000 per year. (The Center on Budget and Policy Priorities estimates that altogether at least 7.3 million marketplace enrollees would see higher premiums due to the reduction in subsidies.) The Administration acknowledges that the majority of those no longer enrolling in marketplace coverage are likely to become uninsured.
The provision has these damaging effects because it involves a significant, albeit technical, change to how CMS calculates the “premium adjustment percentage,” which helps set the amount of marketplace subsidies available to families with incomes of up to 400 percent of the federal poverty level. (Specifically, under the Affordable Care Act, each year, the Treasury Department makes an adjustment to how much income subsidy-eligible families must pay for their share of the premium for the second lowest cost silver plan offered to them in the marketplace. That, in turn, determines the amount of the premium tax credit that is available. The adjustment is intended to reflect the excess of the growth in premiums over the growth in income after 2013. It is also used to determine the limit on annual out-of-pocket costs for both employer-sponsored insurance and the individual market, among other ACA provisions.)
CMS has previously determined this adjustment based on the growth in employer-sponsored insurance premiums, in large part to avoid fluctuations in premium growth in the individual market resulting from implementation of the ACA’s major market reforms starting in 2014 as well as the scheduled end of the federal reinsurance program after 2016. In a sharp departure, starting with plan year 2020, CMS will calculate the premium adjustment percentage based on growth in premiums for employer-based coverage and for individual market premium growth since 2013. That would have the effect of increasing the annual adjustment because it would reflect not only increases in individual market premiums resulting from ACA implementation and the expiration of reinsurance but also premium increases resulting from acts of sabotage by the Administration and Congress that have destabilized the individual market inside and outside the marketplaces. That includes, among others, repealing the individual mandate, ending payments to insurers for providing cost-sharing reductions, cutting funding for outreach and enrollment, and promoting enrollment in plans that do not comply with the ACA such as short-term plans.
As the preamble to the Notice acknowledges: “All commenters on this topic expressed opposition to or concerns about the proposed change…. Almost all commenters were concerned about the impact of the proposal on the health insurance market and individuals and families, citing HHS’ estimates of the impacts in the Regulatory Impact Analysis, including a decrease in enrollment and increase in premiums and out-of-pocket costs for consumers.” The Administration, however, ignored these unanimous comments in opposition and finalized this change to the premium adjustment percentage. It could only muster an extraordinarily weak justification by claiming that it would decrease federal spending and be beneficial to taxpayers and reduce economic distortions by resulting in families facing greater exposure to out-of-pocket health care costs.