END OF 2018 OPEN ENROLLMENT PERIOD (42 states)

Time: D H M S

A Brief, Snarky History of the CSR Mess and why Congressional action is needed NOW.

WARNING: THIS IS LONG AND WONKY BUT IMPORTANT.

The Cost Sharing Reduction (CSR) payment controversy has been sucking up a huge amount of oxygen over the past 9 months. Most of this is due to Donald Trump repeatedly threatening to cut off the monthly reimbursements to insurance carriers since January, but some of the concern was already there before he even took office. Why? Because the whole reason the CSR payments are at risk of being discontinued in the first place is a federal lawsuit filed by John Boehner on behalf of the House Republican Caucus back in 2014.

The case slowly ground it's way through the judicial process mostly under the radar for a couple of years. Law experts like Nicholas Bagley of the University of Michigan took the view that the case actually had some merit to it on the surface, but should still be shot down due to a lack of standing:

If any case meets the §1292(b) standard, it’s this one. Accepting Judge Collyer’s order would mark an unprecedented expansion of judicial authority into interbranch food fights. The judge herself acknowledged that “no case has decided whether this institutional plaintiff has standing on facts such as these.” And getting the standing question squared away could lead to the immediate termination of this misbegotten lawsuit.

...and yet, it came to pass in May of 2016 that, to the surprise of everyone including the House Republicans who had filed the suit mostly as yet another way of sticking their finger in President Obama's eye, federal judge Rosemary Colyer ruled in their favor on the merits of the case:

...saying that the cost-sharing program under the Affordable Care Act, as implemented since January 2014, has been spending money that Congress did not approve. Such spending was unconstitutional because no money can be taken out of the federal treasury if it has not been specifically provided by act of Congress.

...She did, however, conclude that Congress had in fact authorized that program to be created. The judge also found that Congress had provided authority to cover the spending for the tax credits to consumers who use them to help afford health coverage.

The Obama Administration, of course, appealed the ruling, and Judge Collyer put a stay on her injunction pending appeal:

Judge Collyer enjoined reimbursements under the ACA until a valid appropriation was in place, but stayed the injunction. Accordingly, the subsidies are allowed to continue, pending appeal, which was filed on July 16, 2016.

In other words, Judge Colyer ruled that while the ACA does legally require the insurance carriers to cover deductible/co-pay costs for eligible enrollees, and while the ACA does legally require CSR payments to be maded to the insurance carriers to reimburse them for those expenses...technically speaking, no, a formal appropriation of CSR funding had not actually been made to make the reimbursement payments themselves. She then basically notes that this is something that Congress could fix in, like, five minutes by passing a simple, one paragraph bill. You know, something like the following:

SEC. 1. FUNDING FOR COST-SHARING PAYMENTS.

There is appropriated to the Secretary of Health and Human Services, out of any money in the Treasury not otherwise appropriated, such sums as may be necessary for payments for cost-sharing reductions authorized by the Patient Protection and Affordable Care Act (including adjustments to any prior obligations for such payments) for the period beginning on the date of enactment of this Act. Payments and other actions for adjustments to any obligations incurred for plan years 2018 and later will be made.

Boom. Done. 87 words and this whole CSR stupidity goes away: The HHS Dept. has the legal authority to repay the insurance carriers; Trump is no longer in a position to cut the payments off; the carriers drop their rate increases by a good 15-20% or so; the individual market returns to some semblence of stability; low-income enrollees continue to receive financial assistance and all is (relatively) well.

Unfortunately...that's not what happened.

The House GOP was, of course, thrilled with this unexpected victory throughout most of last summer and fall, mainly because they (like everyone else) assumed that Hillary Clinton would succeed President Obama, and that the CSR mess would therefore be dumped in her lap. She would be stuck taking the heat if & when the case was finally ruled on by the U.S. Supreme Court (and even if they ruled against the GOP, at the very least they would've made sure to waste everyone's time, energy and money the way they did with the similarly-themed King v. Burwell case a couple of years ago).

The only problem with their plan, ironically, is that Hillary Clinton did not become the next President. Donald Trump did. Furthermore, they retained control of both the House and Senate, which means that everything which happened to the Affordable Care Act after January 20, 2017 would suddenly become their problem and their responsibility.

And so they kind of freaked out: Their "victory" in House v. Burwell (which would later become House v. Price, and will now presumably become House v. ¯\_(ツ)_/¯ ) had suddenly turned into an anchor around their necks.

At first they simply kicked the can down the road by three months, assuming that hey, the moment they took power they'd be repealing the ACA "root and branch" on Day One anyway, so it'd become a moot point:

On December 5, 2016, the United States Court of Appeals for the District of Columbia Circuit stayed further proceedings in the case at the request of the House of Representatives. Motions to govern further proceedings in the case were due February 21, 2017.

Repeal didn't happen on Day One, which meant they were really stuck with the consequences of their actions, so they delayed it another three months...

Feb. 21, 2017: House Republicans and the Trump administration on Tuesday filed a joint motion seeking to delay lawsuit proceedings that threaten to undo President Barack Obama's health care law, the Affordable Care Act.

By May, they were really stuck with the consequences of their actions, so they begged the judge to delay proceedings again...

Update (5/22/2017, 4:30pm): The Trump administration today asked the U.S. Court of Appeals in DC for a 90-day hold before the administration announces whether it will continue a cost-sharing program that pays for out-of-pocket expenses for millions of families. This delay comes at the worst possible time as insurers file for 2018 marketplace rates, and continues to create uncertainty regarding the future of the Affordable Care Act (ACA). Insurers continue to warn that this uncertainty will force them to drastically raise premiums or leave the markets altogether.​ Read our statement on this development.

...and they probably would have done so a fourth time on August 21st (remember, this is the House GOP begging a Republican-appointed federal judge from pulling the trigger on a ruling in their favor, except...well, I think what happened instead was this:

On August 1, 2017, the United States Court of Appeals for the District of Columbia granted the motion of the attorneys general of 17 states and the District of Columbia to intervene in House v. Price. House v. Price is before the D.C. Circuit on appeal from the ruling of a district court judge in favor of the House of Representatives in its lawsuit claiming that the reimbursement of insurers for reducing cost sharing for low-income qualified health plan enrollees is illegal because Congress had not appropriated funding for the payments. The judge enjoined the payments but stayed her order pending an appeal and the Obama administration in fact appealed. The states had moved to intervene, claiming that they had an interest in the action and that the Trump administration was not adequately defending their interest.

...oh, and while she was at it:

...The court further ordered that the case would continue to be held in abeyance, with status reports at 90-day intervals and the next one due on October 30, 2017. With their status as parties to the case, however, the states may well next seek to get the case moving again.

In other words, the Congressional Republicans have now mananged to deliberately delay a ruling in their favor by a Republican-appointed federal judge not once, not twice, not three times but four times, stretching the ruling out by nearly a full year...because they're terrified of the consequences of their own actions (or in the case of their failure to formally appropriate CSR payments, their lack of action).

Adding to the irony, of course, is the fact that the GOP has added language to do just that, twice...to both the House and Senate versions of the very ACA repeal bills which failed earlier this year. Both versions included explicit CSR appropriation language at the very end...but cut it off after two years as part of terminating the program altogether.

Since then, of course, there have been bipartisan efforts by the Alexander-Murray committee to put together an ACA stabilization bill which includes at its heart...funding CSR payments for the next two years. Unfortunately, that effort was halted by Mitch McConnell as part of the last-ditch effort to cram through the Graham-Cassidy bill, and while it's since restarted, the clock is ticking and the odds of pushing it through the Senate, House and being signed into law by Donald "Let Obamacare Explode!" Trump himself are...slim.

Meanwhile, some carriers have pulled an Eric Cartman and bailed altogether, while the rest are jacking up their 2018 rates to cover their asses on the reasonable assumption that CSR payments will indeed be cut off at some point soon.

That brings things up to the present.

Now, David Anderson of Balloon Juice and I have been pointing out for several months that there's a potential way to turn the CSR lemons into lemonade, via "Silver Loading" and especially the "Silver Switcharoo" gambit. The very simplified version is this: Due to the unusual way that the formula for ACA premium tax credits are calculated and the way that loading the cost of missing CSR reimbursements tie into that, in many states, subsidized exchange enrollees will actually see a significant increase in their premium tax credits while CSR enrollees will continue to receive their financial assistance as well!

In other words, instead of screwing over 18 million people on the individual market, Trump and the GOP's CSR sabotage gambit could potentially end up helping about half of those folks and neither helping nor hurting most of the rest. On paper, this sounds like a brilliant workaround to the problem, and Anderson feels particularly strongly about the Democrats not pushing too hard for CSR funding to be formally restored; he figures that the GOP has more to gain from doing so than the Democrats, and he could very well be right.

HOWEVER, as I've noted before, there are several dangers in going this route:

The point is that as amusing and ironic as the Silver Switcharoo workaround would be, it's also messy, confusing and while it would solve several problems, it would potentially also create a few more...which is why it should only be used if absolutely necessary.

...all of which brings me to the whole point of this particular article: There's one more reason why taking a Dr. Strangelove attitude ("How I Learned to Stop Worrying and Love the Bomb") to CSRs should be approached with extreme caution.

I first wrote about this additional threat just over a year ago, on September 21st, 2016. It was actually brought to my attention by Amy Lotven of Inside Health Policy, who wrote:

CMS Gives Plans An Exit Path If House Gets Courts To Ax Cost-Sharing Reductions

CMS has provided industry its sought-after out should the federal courts agree with House Republicans that the administration illegally allowed the ACA's cost-sharing reductions to flow to health plans without congressional appropriations. The agency included in the qualified health plans' agreements for 2017 a clause that acknowledges their filings were based on assumptions that the CSRs would be in place, and thus their disappearance would be a cause for termination subject to state law.

...The case is expected to be heard this fall, and a ruling could come out next year long after premiums are set. Experts are unclear what would happen if the House wins the appeal. The courts could immediately stop the payments, or potentially stay the decision until the end of the policy year.

But, even if the court blocks the administration from paying plans for the CSRs, the issuers would still be required to provide them since they're required under statute.

The contract clause drafted by CMS would give plans the option of terminating their agreements in that scenario, however subject to state law.

As Josh Schultz explained to me at the time:

The typical agreement a QHP issuer enters into if selling on the FFM requires them to keep the policy in force for the entire calendar year. [This exit clause] gives them option to term the policy abruptly if the Courts rule, or a Trump administration decides, that it won't pay CSR offset payments to carriers. Because this won't hit the Supreme Court until late 17 or early 18, I think this is as much about assuaging carriers fears of a Trump admin trying to destroy the marketplaces as anything else.

In other words, a Trump administration could come in the office on January 20 immediately directing the treasury secretary to not make the February 1 payment for CSR (and only pay the APTC) that month.

My instant response to this was rather ominous:

Now, if Donald Trump manages to win the White House, all 320 million of us are pretty much screwed in a dozen different ways anyway (and yes, that includes anyone who votes for him, which would make for a nice bit of schadenfreude, but whatever), so ironically, I'm not terribly concerned about that; no point in worrying about whether you left the water running when your house is being swept away by a hurricane, after all.

Just so.

The point is that the threat of CSR payments being cut off isn't just that insurance carriers will raise rates through the roof or drop off the exchange next year; (although both of those are already happening); it's also that they could potentially terminate current enrollee policies IN THE MIDDLE OF THE YEAR.

I tried to warn people about this possibility again after the election in November...

...and again in January...

...and again in March...

...and again in early April...

...and again in late April...

...but there was nothing more I could do, and month after month, as often as Trump kept blustering on Twitter that he was going to cut the payments off, they've continued to flow.

At this point, we're pretty much out of the "danger zone" for the rest of 2017; with only 3 more payments left this year, most carriers would probably just eat the losses and try to sue the federal government for the missing payments later rather than further disrupt the market and endure a massive legal and public relations nightmare. Because of this, I (and Anderson) are breathing a sigh of relief over this particular bit of potential nastiness.HOWEVER, Ms. Lotven just reported that the whole "exit clause" thing is back again for 2018 as well:

2018 Contracts For Federal Exchange Insurers Maintain Exit Clause Due To Potential Loss Of CSRs

Insurers' participation contracts in the 34 states considered full federally-facilitated marketplaces for 2018 once again have language that acknowledges rates were developed presuming the Affordable Care Act's tax credits and cost-sharing reductions will be paid, and provide an out for issuers should the funding end. The same clause was included in the 2017 contracts, which compounded concerns over the administration's unwillingness to make a decision on whether to continue making the CSR payments while their legality is under review. However, the language does not appear in the contracts that must be signed by issuers offering contracts in the five state-based exchange states that use the federal platform: Arkansas, Kentucky, New Mexico, Nevada and Oregon.

Health law expert Tim Jost says that the clause is likely missing because the five states have authority over the plan management and contracting decisions. Most of the contract language for insurers in these states focuses on privacy and other general issues. CMS did not respond by press time as to why the language was different.

...“CMS acknowledges that QHP has developed its products for the FFE based on the assumption that APTCs [advanced premium tax credits] and CSRs will be available to qualifying Enrollees. In the event that this assumption ceases to be valid during the term of this Agreement, CMS acknowledges that Issuer could have cause to terminate this Agreement subject to applicable state and federal law,” the FFE contracts state.

The exact language had appeared in the 2017 contracts, and while most stakeholders assumed that it allows issuers to depart the exchanges, other suggested that is less clear.

There are two silver linings here:

  • First, the exit clause in question appears to only apply to 34 states on HealthCare.Gov, not the 12 states running their own exchange or the 5 states which are simply "piggybacking" onto HC.gov.
  • Second, as was the case last year, there's a lot of murkyness about the legality of carriers actually pulling this trigger. The contracts allow them to terminate coverage mid-year, but state laws may very well prevent them from doing so (breach of contract, etc.), and again, it would open up a huge can of legal and PR worms as chemotherapy patients were kicked off their plans mid-session and so forth.

Still, this is Yet Another Massive Headache which neither the ACA, the individual healthcare market, the carriers, the enrollees, the providers or the nation as a whole needed right now.

The bottom line, yet again, is that while not funding CSRs would likely backfire on Trump and the GOP, it's also messy and confusing as hell, and there's just too damned many risks involved for my taste to play chicken in this fashion. APPROPRIATE THE GODDAMNED CSRs.

As for the case itself, well, according to Professor Bagley, at this point the GOP may not be able to stop the judge from pulling the CSR cut-off trigger judicially even if they want to:

The most straightforward fix would be for Congress to appropriate the damn money. That’s probably a nonstarter, given how many Freedom Caucus members would cry foul at funding Obamacare. Nor is it clear whether the Republican leadership is willing or able to broker a deal with Democrats.

...So to get out from under the district court’s injunction, the parties may have to go back to the district court. But the court can modify its prior order only if there’s been a “significant change either in factual conditions or in law.”

Does Trump’s election qualify as such a “significant change … in factual conditions”? Perhaps. Certainly it would be strange to keep an injunction in place when no one on either side of the legal fight wanted it anymore. Judges don’t usually ask too many questions when opposing parties agree about something.

...The only reason to vacate the injunction, then, is because it’d be awfully convenient to keep making the cost-sharing payments — even though the judiciary, the executive, and the legislature all think those payments are unconstitutional. The judge might well balk. Indeed, she might be offended at the effort to enlist the federal courts in an unconstitutional scheme.