On March 8, the White House encouraged Congress to pass stabilization legislation that would not authorize the reimbursement of cost-sharing reductions (CSRs) made by health plans in 2017, as reported by Modern Healthcare. This move comes almost five months after the Trump Administration’s announcement in October that it would discontinue CSR payments effective immediately. The legislation, if passed, would preclude the government from paying CSRs for the 2017 year and would allow CMS to claw back surplus money that plans have received from the federal government and applied towards CSRs.

History of Cost-Sharing Reductions

Section 1402 of the Patient Protection and Affordable Care Act (ACA) requires payors offering qualified health plans (QHPs) on the ACA exchanges to provide CSRs. CSRs reduce out-of-pocket expenses for enrollees with income under specified levels who receive health coverage through silver-level plans offered through the ACA exchanges. CMS estimated that 57 percent of individuals who received coverage through the exchanges in February 2017 received CSRs.

The federal government, in turn, is required to pay QHPs for the amount of the reduction. However, while reimbursement for CSR payments is statutorily mandated, Congress has not appropriated the money.

In 2014, after appropriations legislation failed to allocate funds for Section 1402 reimbursements, the Obama Administration Department of Treasury, in consultation with the Department of Health and Human Services, reimbursed payors for CSRs on the grounds that such payments were statutorily authorized under the permanent appropriations authority granted for certain ACA tax credits and refunds. The U.S. House of Representatives challenged this action, and, in U.S. House of Representatives v. Burwell, 185 F. Supp. 3d 165 (D.D.C. 2016), the U.S. District Court for the District of Columbia ruled that Section 1402 requires an annual appropriation to fund payments to health plans and enjoined further reimbursements under Section 1402 until a valid appropriation was in place. However, the injunction was stayed pending appeal, so the government could continue reimbursing payors for CSRs in the meantime. On December 15, 2017, the parties agreed to a settlement, dismissing the appeal and dissolving the injunction; the Trump Administration had decided to voluntarily terminate CSR payments two months prior.

Current Policy

In October 2017, the Trump Administration announced that it would discontinue CSR payments immediately, concluding that it could not make the payments without a valid appropriation from Congress. This announcement caused concern for payors who were already committed to premium rates and were required to continue providing CSRs regardless. In response, some payors brought legal challenges and sought reimbursement for 2017 CSRs. For instance, Maine Community Health Options filed a lawsuit on December 28, 2017 in the Court of Federal Claims seeking $5.6 million in CSR payments.

The proposed language released by the White House on Thursday takes this policy further by not authorizing the government to make any CSR payments for 2017. Additionally, it would allow CMS to claw back surplus money that, since the announcement in October, some plans have begun applying to the CSRs. It also confirms that “[n]othing in this subsection shall be construed as affecting the requirement of issuers . . . to reduce cost-sharing.”


What Congress will do with the White House’s proposed language is yet to be determined. Previous drafts of the stabilization legislation have included funding for CSRs for 2017. If Congress were to instead pass legislation with the White House’s proposed language, it would be another move under the Trump Administration likely to destabilize and undermine the ACA exchanges. For coverage provided in 2017, payors would take significant financial hits after having set rates using actuarial principles that assumed a full year of CSR payments from the federal government. Small plans may be unable to survive the financial losses. Large plans may choose to discontinue coverage through the ACA exchanges as they will struggle to offer financially viable plans that provide the statutorily required CSRs without payments from the government. Payors that continue to offer coverage through the ACA exchanges will need to increase premiums to account for the elimination of CSR reimbursements.