The Centers for Medicare and Medicaid Services (CMS) recently issued guidance for 2026 rate filings directing issuers in certain states to submit two separate filings: one assuming Cost Sharing Reduction (CSR) payments remain unfunded and another assuming Congress appropriates funds to make CSR payments to issuers.
Why? It’s possible Congress could reinstate direct federal funding for CSRs. If Congress reinstates CSR funding, carriers must operationalize the CSR reconciliation process.
Here’s a look at what CSRs are and the history behind their usage:
What are Cost Sharing Reduction Payments?
CSR payments refer to the direct federal government reimbursements to health insurance carriers. The Affordable Care Act (ACA) intended these payments to cover the difference in claims costs incurred by insurers when providing more generous cost-sharing benefits to eligible lower-income individuals enrolled in Silver plans on the ACA marketplace.
The ACA designed CSRs to address the problem of high “cost-sharing,” which includes deductibles, copays, coinsurance, and out-of-pocket maximums. For individuals with lower incomes (generally less than 250% of the federal poverty limit or FPL) who enroll in Silver plans, the plans offer more generous cost-sharing provisions than standard Silver plans. As a result, out-of-pocket maximums are lower and the plan’s actuarial value (AV) is higher.
Historical Funding
Before 2017, the federal government directly paid insurance carriers for the difference in claims costs between the more generous CSR plans and the standard plans they priced. This process was known as CSR reconciliation. CMS paid these subsidies (payments) from 2014 through September 2017. In 2017, the federal government spent an estimated $7 billion on these subsidies.
Cessation of Payments
The direct federal payments for CSRs stopped on October 11, 2017, after a lawsuit by House Republicans alleged that Congress had not explicitly appropriated the funds for these subsidies, and the Trump administration’s Attorney General issued an opinion agreeing with this. The administration directed HHS and the Treasury to cease all CSR payments until a valid appropriation exists.
Continued Availability of Benefits
The availability of the CSR benefits has not changed. Eligible individuals enrolling in Silver plans on the exchange still receive the enhanced cost-sharing reductions.
Following the termination of federal CSR payments, carriers had to find a way to make up the difference. In most states, this led to “silver loading,” where insurers raised the premiums specifically for their Silver plans to compensate for the cost of providing CSR benefits. This strategy increased Silver plan premiums, increasing the amount of Premium Tax Credits (APTCs) because the government benchmarks APTCs to the second-lowest Silver plan. As a result, the federal government is still effectively subsidizing a significant portion of the cost of CSRs, but indirectly through premium subsidies rather than direct CSR payments to insurers.
Will CSRs be brought back?
Congress could appropriate federal funds for CSR payments to issuers. Paying for CSRs directly might appeal to some Senate Republicans because it could reduce the deficit more than funding CSRs via larger APTCs. Those enhanced APTCs will expire at the end of this year.
CMS recently issued guidance for Plan Year 2026 rate filings, directing issuers, especially in states where CMS handles rate review, to submit two separate rate filing justifications:
- One filing assuming current law (ARPA subsidies expire, and CSR remains unfunded)
- A second filing assuming Congress provides appropriate funds to make CSR payments to issuers, alongside the expiration of enhanced premium tax credits.
CMS has also outlined the procedure for working with states and issuers to switch to the alternate filing if Congress acts to fund CSR payments.
This dual-filing requirement could indicate that the administration is considering bringing back CSRs. However, there’s been no official indication that CSRs will return.
What will health plans need to do if CSRs return?
There are several steps health plans will need to take should CSRs return:
Prepare for CSR Reconciliation
Before 2017, the federal government paid carriers the difference in claims costs between the more generous CSR plans and the standard plans they priced. The process is called CSR reconciliation. After the direct federal payments stopped, this reconciliation process became optional for carriers. If Congress reinstates funding, carriers will need to perform CSR reconciliation again. The process involves calculating what a member would have paid on the standard versus the CSR plan for every claim.
Many vendors who previously assisted with CSR reconciliation likely exited the space when it became optional, so carriers may need to develop internal processes or find a new vendor.
Change Pricing Strategies
Carriers would need to re-evaluate and change their pricing strategies for health plans, particularly for Silver plans. Currently, in most states, carriers use “silver loading,” where they significantly increase the premiums on Silver plans to compensate for the cost of providing CSR benefits, since they no longer receive direct federal reimbursement. If CSRs are funded directly by the government, the focus on pricing a plan would shift to what the carrier expects to spend under the base plan, as the federal government would cover the difference for the CSR variants. As a result, Silver plan premiums would be lower.
Submit Different Rate Filings
Regulatory bodies like CMS are already anticipating this possibility and directing carriers to prepare. For Plan Year 2026, CMS
directed issuers in states without an Effective Rate Review Program (currently Oklahoma, Tennessee, and Wyoming) to submit two separate rate filing justifications. One filing should assume that CSR remains unfunded (current law, with silver loading), and the second that Congress appropriates funds to make CSR payments to issuers. States with Effective Rate Review Programs are also encouraged to require similar dual filings.
Evaluate and Adjust Business Strategies
Other business strategies might need adjustment. For instance, the strategy of offering off-exchange-only silver plans without the “silver load” (which is currently relevant for people who don’t qualify for premium subsidies to avoid paying the inflated Silver premium) would become irrelevant if Congress funds CSR and Silver premiums return to “normal” pricing. Carriers might also re-evaluate decisions based on the current silver-loading dynamic, such as not offering certain metal levels in specific markets. The shift in pricing and potential changes in member distribution by metal level could also impact risk adjustment transfers.
Additional Resources:
CMS hints at possible cost-sharing reduction payments for insurers, impacting ACA enrollment
2026 Filings Just Got Even More Interesting
The ACA’s cost-sharing subsidies
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