More ACA: President Trump’s Termination of Cost-Sharing Reduction Payments

October 17, 2017 - Christine Gantt-Sorenson

Late Thursday evening after President Trump issued an Executive Order earlier in the day directing various administrative agencies to take suggested actions for the hope of reducing the cost of health insurance, discussed here, the Trump Administration announced it would terminate cost-sharing reduction (“CSR”) payments based upon guidance to the Administration by the Department of Justice indicating that there is no federal appropriation for the CSR payments.

The CSR payments are made by the Secretary of Health and Human Services to insurance companies to help offset the cost of providing reduced cost insurance to low income individuals who qualify for them on the Exchange. Insurance carriers providing products on the Exchange have already indicated significant premium hikes for their products if CSR payments are not made in 2018. Many industry experts fear this action would dramatically increase premium costs for those Exchange participants who can afford to remain on the Exchange if this change were to take effect, while leaving other individuals and families who cannot afford the premium increases no options for affordable coverage, discussed here. Although the Administration stated the payments would stop immediately, there really was no guidance as to when they would cease. Any cessation if implemented should not impact 2017 premium amounts as they have already been established but would be anticipated to apply to any 2018 premium amounts even though open enrollment has already begun. Already there are reports of anticipated litigation to oppose the action brought by insurers who are the recipients of the reimbursements as well as nineteen states who oppose the action. Congress has been considering legislation that would fund the CSR payments and the President’s action on Thursday evening may well prompt a quick response.

I received a few questions after last Thursday’s Executive Order asking if the Trump Administration’s actions did indeed nullify the ACA. The Administration is clearly trying to obfuscate the ACA after Congress failed to repeal it. However, employers and others charged with ACA compliance must keep in mind that the ACA remains a federal law that can only be repealed by Congress. As Chief Justice Roberts aptly noted in the Court’s majority opinion in King v. Burwell, “[w]e must respect the role of the legislature, and take care not to undo what it has done.” Those same constitutional constraints apply to the executive branch of government. The Trump Administration’s efforts last Thursday serve to deflate but not undo, or nullify, the ACA. However, this action, as compared to this Administration’s Executive Orders issued to Administrative Agencies regarding the ACA this year, has greater potential to put a chink on the ACA’s armor.

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