Senior Fellow and Senior Counselor
A number of Senate Republicans have suggested that passing Senators Lamar Alexander and Patty Murray’s bipartisan market stabilization bill would reduce premiums enough to largely or entirely offset the premium increases individual insurance market consumers would face from repealing the Affordable Care Act’s (ACA) individual mandate, the requirement that most people get health coverage or pay a penalty. Alexander-Murray, however, would fall far short of undoing the harm that the Republican tax bill’s repeal of the individual mandate would cause.
Alexander-Murray’s main provision would restore, through 2019, cost-sharing reduction (CSR) payments that the federal government was making to insurers but that the Trump Administration halted. As we’ve explained, that would do nothing to reverse the increase in uninsured rates resulting from mandate repeal, nor would it reverse the confusion and uncertainty that repealing the mandate would create in the individual market. But even if evaluated solely based on its short-term effects on individual market affordability, Alexander-Murray is a poor trade for repealing the mandate. (Proposals to provide temporary federal funding for state reinsurance programs would also fall far short of undoing the harm from mandate repeal, as we and others have explained.)
By restoring CSR payments to insurers, Alexander-Murray would indeed reduce premiums substantially for marketplace silver plans — the plans that serve as the benchmark for setting ACA premium tax credits (subsidies that help low- and moderate-income consumers afford premiums). But it would leave premiums for most other plans unchanged, so only a minority of unsubsidized consumers are likely to benefit. On average, the bill would not reduce unsubsidized consumers’ premiums enough to counteract the premium increases that mandate repeal would cause, and it would actually increase premiums (after tax credits) for some subsidized consumers.
Alexander-Murray would have limited benefits for consumers in large part because regulators in most states acted to protect consumers and minimize disruption from the Administration’s decision not to pay CSRs. Specifically, because cost-sharing assistance is available only to consumers who sign up for silver plans, regulators in most states told insurers to raise premiums only for silver plans — not for bronze, gold, or platinum plans — to compensate for the Administration’s decision. For that reason, marketplace silver plan premiums rose about 14 percentage points more (on average) than bronze or gold plan premiums for 2018.
As the map below shows, insurers in most states — states accounting for about 85 percent of total marketplace enrollment — raised premiums only for silver plans to offset the Administration’s decision not to pay CSRs. Of these states, most raised premiums only for silver plans that are sold through HealthCare.gov or the state-based marketplace, leaving silver plans that are offered exclusively outside the ACA marketplaces unaffected. Even more states may take these approaches for 2019, as states learn from one another’s experiences this year.
These state actions have benefited consumers in two important ways. First, they allow most of the roughly 7 million unsubsidized individual market consumers to avoid CSR-related premium increases by buying non-silver plans, or (in some states) by buying a silver plan directly from an insurer rather than through HealthCare.gov or their state’s marketplace. Already in 2017, most unsubsidized individual market consumers enrolled outside of the marketplace, and most unsubsidized marketplace consumers enrolled in non-silver plans. (Hover over the map for details by state.) These percentages will likely be higher in 2018, given the additional, CSR-related premium increases for marketplace silver plans.
Second, due to these state responses, the Administration’s decision to stop CSR payments has actually reduced premiums, after accounting for tax credits, for some of the roughly 9 million subsidized individual market consumers. Premium tax credits adjust dollar-for-dollar with benchmark silver plan premiums, which means that subsidized consumers generally will be able to buy silver plans for about the same price as if the Administration hadn’t stopped the CSR payments. But with silver plan premiums rising faster than bronze or gold plans in many places this year, premium tax credits will rise by more than the cost of these plans. That means that many subsidized consumers will be able to buy non-silver plans at lower prices (after tax credits) because of the Administration’s decision to halt CSR payments. For example, many more consumers than in previous years will be able to buy zero premium bronze plans (that is, plans for which premium tax credits fully cover the cost of premiums), studies find.
By restoring CSR payments for 2019, Alexander-Murray would temporarily reverse the impact that CSR non-payment would have on premiums and tax credits. But, for the reasons described above, this would likely benefit only a minority of unsubsidized consumers and would actually raise prices for some subsidized consumers. In contrast, repealing the mandate would increase premiums by an average of 10 percent for all plans, not just silver plans, and would have no offsetting benefit for any group of consumers.