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Senate Dems’ Bill Would Enhance, Fund ACA’s Cost-Sharing Reductions

Senate Democrats led by New Hampshire Sen. Jeanne Shaheen are pushing legislation that would enhance the value of and eligibly for the Affordable Care Act’s cost-sharing reductions (CSRs) and permanently fund the program, thus eliminating the need for the “silver-loading” workaround that insurers crafted after the Trump administration ended direct payments to reimburse their costs for the subsidies in 2017.

The Improving Health Care Affordability Act, introduced March 1, also would also make permanent the ACA premium tax credit enhancements in the soon-to-be-enacted COVID-19 relief bill.

And the Senate Democrats’ bill would lift the actuarial value of the ACA subsides from 70% to 80% by linking the premium tax credits to the gold-level instead of silver-level plans.

The legislation would insure another 4.5 million people, according to the Urban Institute economist Linda Blumberg.

Additionally, the bill would save households -- including those that received no subsidies under current law - an average $1,400 per year, Blumberg says. Federal spending would increase by about $350 billion over a decade, Blumberg estimates.

Blumberg and colleagues recently published a paper simulating five policy changes that, like Shaheen’s bill, would increase the ACA’s premium tax credits and the CSRs. Shaheen’s bill is a bit more generous than the options modeled by Urban, which is why Blumberg expects larger enrollment, more household savings and a slightly higher price over 10 years.

Urban experts also point out that the bill could be implemented quickly since it only requires a change in the computation of subsidies and eligibility -- the structure is already place.

Shaheen’s bill also would end the “silver-loading” work-around in a way that does not harm consumers.

Under the ACA, certain silver-level plans are required to reduce out-of-pocket costs for consumers that earn from 100 to 250 percent of poverty. The Obama administration reimbursed plans directly for the costs of those spending reductions, but GOP lawmakers claimed the allocations were illegal without a formal appropriation. After various legal proceedings, in 2017 the Trump administration stopped paying the CSRs.

But, as Blumberg says: If the goal was to undermine the ACA, ending the CSRs did not have that effect.

In 2016, she had modeled what might happen if the direct reimbursements for CSRs were ended. The aftermath happened as Blumberg predicted: Insurers and state regulators quickly crafted a workaround in which insurers increased premiums on their silver-level products to make up for the loss of direct payments. And since subsidies are based on the second lower-cost silver-level product, the larger premiums resulted in larger tax credits for everyone. Millions of Americans were eligible for zero-dollar bronze plans, lower-cost silver plans and in some cases gold products -- and federal spending on subsidies also went up.

Later, when the Trump administration considered barring insurers from silver-loading to save federal money, ACA advocates who had been angry over the decision to end CSRs pivoted to defend the practice. Ending silver-loading would hike premiums for low-income enrollees and reduce enrollment numbers, they argued.

Shaheen’s bill is structured to more efficiently spend federal dollars so that nobody would be worse off under the bill than under the status quo, says Stan Dorn of Families USA, which has endorsed the legislation. The ACA made incredible progress, but this bill would go a long way toward fixing the job, he adds.

He points to Kaiser Family Foundation data on 2021 ACA plans, which indicate that under Shaheen’s bill, people earning from 200 -250% of the FPL could switch from a plan with a $4,800 deductible to one with an $800 deductible -- with no additional premium costs.

It is exciting to see this serious attempt to make health care coverage more affordable, he says.

The Bill

Shaheen’s Improving Health Care Affordability Act would permanently extend the ACA premium tax credit increases that passed as part of the American Rescue Package.

It also would expand CSRs to everyone earning up to 400% of poverty. For enrollees earning up to 200% FPL, the CSRs would hike the actuarial value of their plan from 80% up to 95%. Enrollees earning 200%-300% of FPL would have plans with a 90% AV and those earning from 300%-400% of FPL would get their plan value boosted to 85% AV.

In addition to Shaheen, the bill is sponsored by Sens. Tammy Baldwin (D-WI), Bob Casey (D-PA), Michael Bennet (D-CO), Maggie Hassan (D-NH), Richard Blumenthal (D-CT), Jack Reed (D-RI), Catherine Cortez Masto (D-NV), Debbie Stabenow (D-MI), Tina Smith (D-MN), Jon Tester (D-MT), Chris Murphy (D-CT), Ben Cardin (D-MD), Jacky Rosen (D-NV), Amy Klobuchar (D-MN) and Tim Kaine (D-VA).The bill has been endorsed by Families USA, Protect Our Care, and the National Partnership for Women & Families.