Proposed Cut To Health Care Subsidies Won't Affect 12,000 Vermonters With 'Silver' Plans

Oct 24, 2017

Last week, President Donald Trump announced that his administration was going to terminate federal subsidies that are paid to health insurance companies under the Affordable Care Act.

The subsidies are used by the insurance companies to offer a group of consumers lower out of pocket caps.

The President's decision to end these subsidies has caused a number of people, including Sarah Alexander of Burlington, to question if she will lose her benefits if the payments to the insurance companies are permanently terminated.

"I am 25 years old and I work part time for a non-profit here in Burlington,” said Alexander. “I've been hearing all this news about Trump's decided to cut a great deal of this, if not all of it, and I just want to know as a Vermonter living here having health coverage through the state how is this going to impact me?"

Joyce Manchester is a senior economist at the Vermont Legislative Joint Fiscal Office. She says the law is very clear: Consumers are entitled to continue to receive these benefits even if the subsidies are eliminated.

"I am 25 years old and I work part time for a non-profit here in Burlington ... as a Vermonter living here having health coverage through the state how is this going to impact me?" — Sarah Alexander

“The insurance company loses the subsidy payment from the federal government, yes, but it's in federal law, it's in the Affordable Care Act, that that insurance company still has to provide the enhanced benefits," said Manchester.   

So where's the confusion?

In an executive order, Trump blocked what are known as cost sharing reductions, or CSRs.

These are payments that the federal government makes to the insurance companies to provide lower out of pocket caps for low and middle income consumers who select a "Silver" policy on their health care exchange.

"The insurance company loses the subsidy payment from the federal government, yes, but it's in federal law, it's in the Affordable Care Act, that that insurance company still has to provide the enhanced benefits."—JFO senior economist Joyce Manchester

Wait, what are "silver" plans?

They are the most popular offering sold under the Affordable Care Act and they have out of pocket caps of roughly $7,000 per person. But with the federal subsidies, these out pocket expenses can be reduced by as much as $2,000.

In Vermont, Blue Cross and MVP received a combined total of $12 million to provide these benefits to roughly 12,000 people who have incomes less than 250 percent of the Federal Poverty Level (or roughly $30,000 for an individual and $60,000 for a family of four.)

Congress is now debating the fate of the subsidies. But if they're not restored, insurance companies will likely seek a premium increase to cover these costs.

They could raise premiums on just the "Silver" plans that they sell or they could increase premiums on all policies sold on Vermont Health Connect. Thirty-seven states have decided to boost rates for the "Silver" plans.

If Vermont goes this route, Manchester says there will very little impact on consumers who purchase a "Silver" policy because they will also be eligible for a larger federal tax credit.

"The net cost after you take account of the health care plan and the premium tax credit would be the same to that individual," said Manchester.

But a decision to boost rates could affect those Vermonters who make too much money to qualify for the federal tax credits.

These are folks with incomes that are more than 400 percent of the Federal Poverty Level (or roughly $48,000 for a single person or $98,000 for a family of four.)

Human Services Secretary Al Gobeille is concerned that some people in this category might choose to drop their coverage rather than pay the higher premiums.

“If you don't fix that and you expect that the rest of the marketplace to absorb that kind of money you're going to increase the cost of the insurance,” said Gobeille. “And you will lose folks that were going to be participate in that marketplace and that in and of itself has a destabilizing impact.”

It's unlikely that any consumers who purchase their polices on Vermont Health Connect will see a rate hike this year. That's because Green Mountain Care Board chairman Kevin Mullin wants to see how this situation plays out in Congress before considering any requests to increase premiums.

"The rates are set and nothing will happen immediately,” said Mullin. “It's too premature to even consider anything happening with the rates and more than likely most of the impacts on rates will be for the following year."

How was President Trump able to eliminate the subsidies without Congress?

Joyce Manchester at the legislature's Joint Fiscal Office says Congress never actually appropriated any money to pay for the subsidies when it passed the Affordable Care Act.

President Obama issued an executive order calling on the Treasury Department to make the payments. That decision is currently being litigated and will likely be decided by the U.S. Supreme Court.

"What President Trump has done is to end that executive action through a different executive action which just says the Treasury is no longer going to pay these amounts to the health insurance companies," said Manchester. 

There are several bills in Congress that would specifically authorize the payment of the federal subsidies to the insurance companies.

But it's not clear if any of these proposals will win the support of the Republican-controlled House and Senate and the approval of President Trump.