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Kryeziu, Cristina (CoveredCA)

From: Bertko, John (CoveredCA)

Sent: Thursday, September 22, 2016 10:21 AM
To: Lee, Peter (CoveredCA); DeBenedetti, James (CoveredCA); Power, Pamela (CoveredCA);
Downer, Kristen (CoveredCA); Menashe, Isaac (CoveredCA)
Subject: Fw: CMS Gives Plans An Exit Path If House Gets Courts To Ax Cost-Sharing Reductions

In case you haven't seen this. While I think the court case on CSRs is unlikely to go the wrong way, who can 

From: bertko.john  
Sent: Thursday, September 22, 2016 7:30 AM 
To: Bertko, John (CoveredCA) 
Subject: Fwd: CMS Gives Plans An Exit Path If House Gets Courts To Ax Cost‐Sharing Reductions  

CMS Gives Plans An Exit Path If House Gets Courts To Ax Cost-Sharing Reductions

September 20, 2016

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CMS has provided industry its sought-after out should the federal courts agree with House Republicans that the
administration illegally allowed the ACA's cost-sharing reductions to flow to health plans without congressional
appropriations. The agency included in the qualified health plans' agreements for 2017 a clause that
acknowledges their filings were based on assumptions that the CSRs would be in place, and thus their
disappearance would be a cause for termination subject to state law.

Industry sources previously told Inside Health Policy that they were seeking contract language that would
mitigate the impact of a court ruling in favor of the House, even though the issue is unlikely to be settled within
the year. One source says the clause is what plans had recommended.

Agreements must be signed and returned to CMS by Friday (Sept. 23).

Plans are extremely concerned about the court case and the vast uncertainty that would result from requiring
Congress to provide funding for the CSRs on a year basis. The annual funding requirement would be
unworkable, Candy Gallaher, senior vice president for state policy at America's Health Insurance Plans, told a
panel of state regulators at a National Association of Insurance Commissioners meeting last month. This is
because issuers begin the QHP certification process in the spring, while Congress does not focus on
appropriations until far later in the year.

The ACA's cost-sharing reductions are designed to lower out-of-pocket costs for residents earning below 250
percent of the poverty level who buy certain Silver-level plans. The CSRs work by increasing the actuarial
value of those plans from 70 percent to 94 percent, 87 percent or 73 percent based on the income level. Plans
cover the services and are reimbursed via payments made from the same funding pool created by IRS that HHS
uses to compensate insurers for the mandatory premium tax credits.

The House GOP filed suit in November 2014 claiming the administration sidestepped congressional
appropriations to allocate the cost-sharing reductions. The administration countered that the payments do not
need to go through Congress. In September 2015, Judge Rosemary Collyer of the Federal District Court in D.C.
surprised stakeholders by ruling the House has standing to sue HHS. Collyer then sided with the House on the
merits in a May decision.

The administration appealed the case on July 6.

The case is expected to be heard this fall, and a ruling could come out next year long after premiums are set.
Experts are unclear what would happen if the House wins the appeal. The courts could immediately stop the
payments, or potentially stay the decision until the end of the policy year.

But, even if the court blocks the administration from paying plans for the CSRs, the issuers would still be
required to provide them since they're required under statute.

The contract clause drafted by CMS would give plans the option of terminating their agreements in that
scenario, however subject to state law.

“CMS acknowledges that (qualified health plan issuer) has developed its products for the FFE based on the
assumption that APTCs and CSRs will be available to qualifying Enrollees. In the event that this assumption
ceases to be valid during the term of this Agreement, CMS acknowledges that Issuer could have cause to
terminate this Agreement subject to applicable state and federal law,” the language says.

The clause mirrors one included in the 2015 contracts when plans were concerned about potentially losing
access to advanced payment tax credits due to a case (King v. Burwell) pending at the time that could have
blocked the credits in states using the federally-facilitated exchanges. The Supreme Court later sided with the
administration in that case.

House v. Burwell could end up at the Supreme Court as well. -- Amy Lotven (