Follow-Up About the Budgetary Treatment of Cost-Sharing Reductions
CBO provides additional information to Congressman Mark Meadows about the budgetary treatment of the government’s payments to reimburse health care insurers for cost-sharing reductions they provide to eligible people.
Insurers that participate in the marketplaces established under the Affordable Care Act are required to offer cost-sharing reductions (CSRs) to eligible people. CSRs reduce deductibles and other out-of-pocket expenses like copayments. Before October 12, 2017, the federal government reimbursed insurers for the costs of CSRs through direct payments. Those payments have now been terminated, and the subsidies for the CSRs are instead being funded through higher premiums and larger tax credits based on those premiums.
CBO and the staff of the Joint Committee on Taxation project that, under current law, the entitlement for subsidies for CSRs will continue to be funded that way. So in its baseline, CBO no longer projects direct payments for CSRs and, instead, reflects the current form of funding.
This letter responds to questions from Congressman Mark Meadows about that change in the baseline and the consequences for estimating the budgetary impact of legislation that would restore and fund direct payments.