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Analysis

ACA Risk Adjustment Program 'Operated Smoothly' in 2018, CMS Says

By Steven Porter  
   July 01, 2019

The agency released data showing what it described as the program 'working as intended' to redistribute financial resources according to the relative risk of participating health plans.

After a short-lived stoppage of the Affordable Care Act's permanent risk-adjustment program last year, the Centers for Medicare & Medicaid Services said in a report Friday that the program "operated smoothly for the 2018 benefit year."

By that, the CMS report means the program—which is designed to help stabilize premiums by reallocating financial resources among insurers in accordance with the relative risk levels of the populations they cover—continued to accomplish its objective despite the brief interruption.

"The risk adjustment program is working as intended by more evenly spreading the financial risk carried by issuers that enrolled higher-risk individuals in a particular state market risk pool, thereby protecting issuers against adverse selection and supporting them in offering products that serve all types of consumers," the report states.

A total of 572 insurers participated in the risk-adjustment program last year, down from 654 insurers a year prior. Total transfers for the 2018 benefit year were about $10.4 billion, with half of that amount being payments CMS disbursed and the other half being charges CMS collected, since the program is required by law to be budget neutral.

The program has been controversial among insurers, with smaller health plans and co-ops arguing that the payments are calculated in a way that benefits larger health plans. New Mexico Health Connections, a nonprofit health plan based in Albuquerque, persuaded a federal judge last year to declare the government's methodology illegal. That decision was purportedly the reason CMS froze the program last July, though some critics accused the administration of pouncing on the court decision as a form of "aggressive and needless sabotage" to undermine the ACA's operation. Others argued the panic was overblown. (The litigation is ongoing.)

The payments were unfrozen for the 2017 benefit year two-and-a-half weeks later, and CMS adopted a fix for the 2018 benefit year in December. The relevant policies for the 2019 benefit year weren't subject to the judge's ruling.

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

The administration froze risk-adjustment payments a year ago, citing a decision by a federal judge in New Mexico.

Critics called on the administration to move quickly, and the payments were unfrozen about two-and-a-half weeks later.

A final fix for the 2018 benefit year was adopted in December.


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