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News & Press: Industry News

Policy Options in the Event Cost-Sharing Reduction Payments Stop

Monday, August 21, 2017   (0 Comments)
Posted by: Bradley Coffey, MA, AAOE Government Affairs
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The ACA created a way for states to “innovate” in healthcare. Known as Section 1332 State Innovation Waivers, these waivers allow states to apply for a waiver from the Department of Health and Human Services (HHS) to modify or waive certain provisions of the ACA. If a state application meets all of the statutory requirements, the state is eligible to receive any APTC and CSR payments that the state would have otherwise received without the waiver.

If a state takes on the responsibility of providing the controversial CSR payments under a State Innovation Waiver, the state would then receive the APTC payments that it would have received absent a waiver from the federal government. Because the APTC covers a larger group of individuals, those payments are going to be higher than the CSR payments the state must expend, thereby giving the state a profit (known as excess pass-through funding). This excess funding can then be used for anything the state wants to use it for. It does not have to be used for healthcare expenditures.

The administration has indicated that it will be more aggressive in its approval of State Innovation Waivers. However, this solution has some drawbacks as well. The result of terminating the CSR payments and turning these over to the states via the State Innovation Waivers will inevitably create a patchwork of low-income insurance funding throughout the United States, something that many insurers would likely hope to avoid. Additionally, already cash-strapped states would have to find millions of dollars in their budgets for a new line-item that the federal government had originally promised to provide. Many states budget under the principle of a “balanced budget” in which revenues are equal to expenditures, meaning that other services might have to be cut to provide CSR payments to low-income individuals.

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