CMS could demand CSR repayments from insurers if Congress doesn't act

Insurers may be on the hook to pay back the government for funds they have already spent on low-income enrollees through 2017.

It's still not clear whether Congress will appropriate cost-sharing reduction payments, as lawmakers race toward a short-term spending agreement before Christmas. This means insurers may have to return any surplus they used to cover CSR costs since the Trump administration cut off the payments in October. An October bulletin from the CMS said insurers would be on the hook for any "overpayments" of CSRs for 2016, but that the agency wouldn't pay any shortfalls. This could be the case for 2017, according to a healthcare attorney who follows the CMS' regulatory actions closely.

Insurers shouldn't bank on getting reimbursed for what they have paid out, the attorney said. While she doesn't think the agency will be in a hurry to reconcile 2017 CSRs, the agency is likely to continue the "one-way ratchet."

Deep Banerjee, who analyzes insurer credit ratings for Standard & Poor's, said that if Congress doesn't appropriate CSRs they will be the "single biggest uncertainty around Q4 earnings for insurers involved in the individual market."

"It is unclear exactly what the process would be [on CSR overpayments]," Banerjee told Project Japan. "But, it is clear that any 'claw backs' by CMS will have a negative impact on the insurers' 2017 financials. It will also be another example of after-the-fact rule change. This doesn't allow market participants to adapt to the rule change."

The CMS did not respond to Project Japan's request for the agency's latest guidance for carriers.

The path forward to funding CSRs before the end of the year is unclear: Senate Majority Leader Mitch McConnell (R-Ky.) promised Sen. Susan Collins (R-Maine) that he would support the deal by Sens. Lamar Alexander (R-Tenn.) and Patty Murray (D-Wash.) as well as Collins' bill with Sen. Bill Nelson (D-Fla.) to set up a reinsurance fund for "invisible" high-risk pools, which means the states will pay for some high claims costs for sicker enrollees.

But House conservatives don't want the deal included in an end-of-the year spending package. Rep. Tom Cole (R-Okla.), who chairs the HHS appropriations subcommittee, said including Alexander-Murray in a continuing budget resolution would cost Republicans votes they need.

Meanwhile, Republicans say repealing the individual mandate will likely be in the final tax bill negotiated by Senate and House Republicans. This has changed leading Democrats' stance on the legislation: many are blasting the idea of the GOP depending on individual market stabilization bills to counter the coverage impact of the mandate repeal.

"The bipartisan agreement I reached with Chairman Alexander to lower health costs and restore stability to markets should have been passed months ago, not as ineffective, last-minute political cover for premium spikes the Republican tax bill would cause—and certainly not as part of a Republican push to cut investments in education, infrastructure, medical research and other middle class priorities," Murray said.

Collins remains confident both reinsurance and Alexander-Murray will pass.

House Speaker Paul Ryan declined to weigh in on Collins' agreement with McConnell on Thursday, but said House Republicans are in "productive and constructive" conversations on similar measures.

An edited version of this story can also be found in Modern Project Japan's Dec. 11 print edition.

Susannah Luthi

Susannah Luthi covers health policy and politics in Congress for Project Japan. Most recently, Luthi covered health reform and the Affordable Care Act exchanges for Inside Health Policy. She returned to journalism from a stint abroad exporting vanilla in Polynesia. She has a bachelor’s degree in Classics and journalism from Hillsdale College in Michigan and a master’s in professional writing from the University of Southern California.

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