The impact of terminating cost-sharing reductions payments on health insurance plan choices.

Abstract

The Trump administration terminated cost-sharing reductions (CSRs) payments to health insurers in 2017, while still required insurers to provide CSRs to eligible enrollees in the Marketplace. Marketplace administration data reveals that, in response to this termination, insurers raised premiums to compensate for their loss. Consequently, premium increases led to more advanced premium tax credits for enrollees in the Marketplace. To investigate the impact of CSRs payment termination on low-income consumer insurance plan choices, I leverage variations in state price regulations and employed a difference-in-differences design. In a robustness analysis, I utilized differences in county income distributions to examine the effects of the termination on insurance choices. The results indicate that after the termination, more low-income enrollees opted for cheaper bronze plans, and fewer chose silver plans. These results suggest that alterations in subsidy channels may inadvertently encourage low-income individuals to purchase less expensive health insurance plans, highlighting an unintended consequence of the termination of cost-sharing subsidies.