The Congressional Budget Office’s (CBO’s) process for determining the budgetary treatment of cost-sharing reductions (CSRs) followed the normal procedures for addressing questions regarding the baseline and cost estimates for legislation, according to CBO Director, Keith Hall. Responding to questions raised by Representative Mark Meadows (R-N.C.) about the treatment of CSRs after direct government payments to insurers were discontinued, Hall said that the CBO’s budgetary treatment of CSRs in its baseline is consistent with the provisions of the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA) (P.L. 99-177). Furthermore, he said, "If legislation was proposed to appropriate funding for CSRs, what would change is the method of paying for the entitlement; the underlying requirement for payment exists regardless of method" (CBO Report, June 8, 2018).
CSRs and payments to insurers. Established by the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), CSRs decrease deductibles, co-payments and other out-of-pocket expenses for eligible individuals who purchase a health insurance plan, generally silver, from a participating insurer. To be eligible for a CSR, individuals must have an income of between 100 and 250 percent of the federal poverty level. Insurers were reimbursed for the costs of CSRs through direct payment from the federal government until October 12, 2017, when the administration ceased making payments to insurers without an appropriation. Although insurers are no longer receiving payments from the government, they are required to continue to offer CSRs. To cover the costs of CSRs, insurers have raised the premiums for silver plans. CBO and the Joint Commission on Taxation (JCT) project that subsidies for CSRs are being funded through higher premiums and larger tax credits based on those premiums instead of the payments to insurers.
CBO’s budgetary treatment of CSRs. CBO consulted with the House and Senate Budget Committees soon after the payments ended on the best approach to determine its spring 2018 baseline projections. Because CBO continues to treat CSRs as an entitlement, it determined for 2018, it would align its baseline projections to actual premiums in the marketplace rather than projecting the direct payments for CSRs. CBO’s projections of premiums, enrollment, and government subsidies now reflect that most insurers have covered the costs of CSRs by increasing the premiums for silver plans offered in the marketplace for the 2018 plan year. The projections also would reflect CBO’s expectations that without direct payments for CSRs, funding for CSRs will be though premium tax credits. This approach allows for the baseline projections to reflect the insurance market place more accurately. In addition, it will reflect that the costs of CSRs are being incorporated into premiums and payment of premium tax credits.
In addition, the CBO budgetary treatment is consistent with the BBEDCA because the baseline reflects the payment required by the law as a whole. ACA §1401 requires premium tax credits to be allowed, §1402 directs the payment of CSRs, and §1412 states that payments be made to insurers for both CSRs and premium tax credits. Although the administration ended the direct payments for CSRs, §§1401 and 1412 remain in effect, CBO reflects the payment of CSRs in its baseline by reflecting premium tax credits. In addition, BBEDCA does not specify how required payments are to be accounted for in the baseline. Further, CBO’s budgetary treatment of CSRs takes into account the shared responsibilities for implementation of the ACA given to the HHS Secretary and the Secretary of Treasury as well as other relevant agencies. CBO has not transferred requirements from one Secretary to another, it has projected the effects of government actions on the budget.
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