Alaska still stands to save on premiums even if Trump ends Obamacare subsidies

(Photo by Gage Skidmore/Flickr Creative Commons)

In the wake of the U.S. Senate’s failure to produce an Obamacare repeal, President Donald Trump threatened to halt one part of the health care law he has control over: subsidies that help low-income people with out-of-pocket health-care costs. A new report by the Congressional Budget Office out today says such a move would wreak havoc on individual insurance marketplaces.

The report says ending the monthly cost-sharing reduction subsidies would cause individual insurance rates to spike by as much as 20 percent next year, causing some marketplaces to collapse and the federal deficit to grow by $194 billion over the next decade.

But this is one time—and perhaps the only time—in the health care debate that Alaska can breathe relatively easy. That’s because Alaska’s lone insurer on the individual marketplace—Premera Blue Cross Blue Shield—has already planned on Trump axing the payments.

And it’s still expecting a 21.6 percent drop in premiums.

That’s right. If Trump follows through with a threat that the CBO says will spike premiums by 20 percent around the country, Alaska can still expect an average 21.6 percent drop in premiums.

That’s thanks to the state’s newly minted reinsurance program. The program was designed by the state, passed by the Legislature and approved by the feds this year. It provides the state with federal funding to offer additional insurance for people with high-cost medical expenses, which in turn lifts the financial burden from healthy individuals who’ve so far shouldered much of those expenses.

Everyone stands to save under the program, and it’s expected to be neutral on the federal deficit because it’ll reduce the need for premium tax credits—which are set by law and can’t be touched by Trump—across the board.

It underscores just how big of a deal the state’s reinsurance program stands to be, but Alaskans could see even lower premiums if Trump continues the subsidies.

“We’re anticipating further reduced rates if (cost-sharing subsidies) continue,” said Jessie Menkens, an expert on the marketplace with the Alaska Primary Care Association who coordinates the Navigator Program. “That 21.6 percent is assuming there are no CSR payments moving forward.”

She said, however, that there are impacts beyond just premiums that should be considered.

“We can’t forget that we’re part of the national system as well,” she said. “How this law is administered is important. We are in a different situation because of our reinsurance program, but we are not sheltered from some of the politics and sway right now.”

She also said there are plenty of Alaskans on the individual insurance marketplace who’ll feel the sting if cost-sharing reduction subsidies are eliminated.

Still not rosy for everyone

The subsidies are additional federal payments that ease out-of-pocket expenses like deductibles and co-payments for low-income buyers. Alaskans earning between $20,783 and $37,100 currently qualify for the extra savings. The state currently receives about $10 million annually under the payments, helping nearly 9,000 individuals. They’re separate from premium tax credits, which vary on income and are set by federal law.

The concern is that without financial assistance for the still-high deductibles health insurance would become prohibitively expensive for low-income Alaskans even if they’re paying lower premiums, Alaska Insurance Division Director Lori Wing-Heier explained via email.

“The low-income or moderate income, who qualify for tax credits to pay their premiums, will be responsible for the out-of-pocket expenses (without the cost-sharing reductions),” she said. “This would include deductibles and co-pays. Due to the size of the deductibles, for most plans, this can be close to $10,000 for an individual/family prior to the insurance contributing. Low-income and moderate income may not seek treatment knowing that they may be responsible for the first $10,000 (estimated) prior to insurance paying.”

The deadline to set next year’s rates has been extended from Wednesday to mid-September. The Alaska Division of Insurance has also requested Premera put together a rate proposal based on the subsidies staying in place.

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