BC Healthcare Restructuring Update: R CSR’s O-U-T? Less U.S. Gov’t $$ = More 11s . . . ?

by Bryan Cave
Contact

Ok, if your attention span is anything like ours, all this wonky stuff about the ins and outs of the Affordable Care Act (or “ObamaCare,” as most of us know it) causes your eyes to glaze over and makes your mind wander to simpler topics, like who will win Dancing with the Stars, whether the Will & Grace reboot can make it, or how Luke may soon be revealed as the most evil Jedi of all.

But trust us, faithful reader, and you can, in about three short minutes, become a whiz on last week’s latest change to ObamaCare, which we think will lead to a lot more healthcare-related restructuring activity. So here is the 411 on last week’s termination of ObamaCare’s so-called “CSR Subsidies,” and its impact on our precarious, bankruptcy-prone, healthcare marketplace.  All presented to you in easy-to-follow FAQs!

What is a CSR Subsidy?

The federal government calls them “Cost-Sharing Reduction Subsidies.” In short, a key part of ObamaCare had the federal government give cash to insurers.  In turn, insurers used that money – the CSR Subsidy – to lower all ObamaCare premiums, and also reduce out-of-pockets and deductibles for low-income ObamaCare enrollees.

How much were these CSR Subsidies?

The CSR Subsidies cost the federal government about $7-$9 billion annually.

How much did the CSR Subsidies help?

A lot. The Kaiser Foundation – which has great coverage of this and other healthcare issues – estimates that the CSR Subsidies to insurance companies prevented certain rate hikes that would be borne by all ObamaCare enrollees.  Also, each low-income ObamaCare enrollee’s annual medical and prescription deductibles decreased by over $3,000 and annual out-of-pocket maximums were lowered by over $5,500. We’re not making this up, click here to see the Kaiser Foundation study for yourself.

So what will happen without the CSR Subsidies?

Actually, low-income ObamaCare enrollees are entitled to discounts from their insurers whether the federal government subsidizes / reimburses the insurers or not.  But that $7-$9 billion in lost government funding has to be made up somewhere – so insurers in the ObamaCare exchanges are expected to raise rates next year by 15-21% due to the loss of CSR Subsidies, according to the Kaiser Foundation study cited above.

But I thought Congress didn’t “Repeal or Replace” ObamaCare – So how did this change happen?

The CSR Subsidies were required under ObamaCare – but Congress never actually appropriated any money to make the CSR Subsidies to insurance companies.  The prior administration paid the insurers anyway, leading to a very weird lawsuit by Congress against President Obama.  Last week, President Trump simply decided to no longer send funding to insurance companies, and since the funding had never been appropriated by Congress, no congressional action was needed to end the federal government’s CSR Subsidies.

How does this relate to restructuring?

We’re lawyers, not economists. But even we can surmise that when the price of a good or service (here, ObamaCare) goes up 15-21% in one year, less people will buy it.  Indeed, our friends at The Motley Fool estimate that the loss of CSRs will result in 7 million more uninsured Americans.  So when folks said this was a real blow to ObamaCare, they weren’t kidding.

And of course, fewer patients with insurance means more unreimbursed care for hospitals and other healthcare providers. This precarious industry is getting ready for another terrific beating.  Sure enough, when news of the end of the CSR Subsidy program broke last Thursday night, October 12, the next day saw all major healthcare stocks – insurers, hospitals, ambulatory centers, even benefits administrators – take serious losses.  The strong ones will make it; as to the weak ones, get ready for more restructuring activity as more uninsured patients cause more losses.

So, is all lost when it comes to the CSR Subsidies?

People, Washington D.C. is a weird place.  Even as we were writing this Bankruptcy Cave Blog post last night, news broke that a bipartisan effort was underway in the Senate to reinstate the CSR Subsidies for two years, and President Trump said he would support it!  What??  But then, as we were editing this post today, President Trump tweeted that the CSR Subsidies were just a bailout for insurance companies – and he won’t support the new legislation.  Anyway, we give up trying to figure out what is next, folks.  Hey, is Will & Grace on?  Is T.O. dancing a salsa tonight?  And when is the next trailer for The Last Jedi going to drop?

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Bryan Cave | Attorney Advertising

Written by:

Bryan Cave
Contact
more
less

Bryan Cave on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.