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'Self-Inflicted Wound'? Health Plan Accuses HHS of Risk-Adjustment Charade

By Steven Porter  
   August 07, 2018

The government's decision to unfreeze ACA risk-adjustment payments with a new final rule demonstrates 'just how specious' its pending claims are, the plaintiff alleges.

A nonprofit health plan that challenged the government's methodology for calculating risk-adjustment payments under the Affordable Care Act has some blunt criticism for Health and Human Services in its latest court filing.

Albuquerque-based New Mexico Health Connections faulted HHS for issuing a final rule last month to unfreeze billions of dollars in risk-adjustment payments despite having suggested the Centers for Medicare & Medicaid Services had no choice but to freeze the payments suddenly nationwide in light of the judge's four-month-old decision.

The issuance of the final rule "underscores just how specious" the government's pending claims in the case are, attorneys for NMHC wrote.

The health plan, which filed suit in 2016, persuaded U.S. District Court Judge James O. Browning to declare the methodology illegal last February on the basis that HHS had failed to justify its use of a statewide average premium in the calculation. The government asked Browning to alter his ruling, arguing that the ramifications of his decision to vacate relevant regulation for benefit years 2014 through 2018 would be "tremendously disruptive, not only for insurance companies nationwide, but also for policyholders and state insurance markets generally."

Toward the end of a hearing on the matter in June, Browning indicated he would aim to have a decision by the end of the summer, according to federal court records. That decision had not been issued as of Tuesday morning.

Rather than waiting for Browning's follow-up decision or issuing a final rule to address his concerns, the government announced Saturday, July 7, that the payments would be halted. The Wall Street Journal had reported the night before that CMS planned to suspend the program—this despite a contradictory opinion by another federal judge in Massachusetts.

Less than three weeks later, however, CMS announced a final rule to resume risk-adjustment payments for the 2017 benefit year. The rule adopts the previous methodology with an added explanation regarding the program's budget-neutral status and its use of statewide average premiums.

Some health plans praised HHS and CMS officials for the swift response to concerns that widespread uncertainty without the risk adjustments could result in higher premiums next year. But NMHC was not among them.

"To be sure, this new Rule is both procedurally and substantively improper," attorneys for NMHC wrote. "For one thing, the Administrative Procedures Act does not permit HHS to delay taking action for months and then use an alleged timing emergency of its own creation to avoid going through notice and comment."

The way the government handled this case makes clear they had more options than they had suggested, the NMHC attorneys alleged.

"To the extent that there was any doubt that HHS's cry of disruption was a purely self-inflicted wound, HHS's new Notice clearly demonstrates its ability to promulgate a new rule," the attorneys wrote, urging Browning to deny the government's pending motion for reconsideration.

Spokespeople for HHS and CMS could not be reached for comment.

Health Plan Accuses HHS of Risk-Adjustment Charade by HLMedit on Scribd

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


The plaintiff was not pleased with the government's decision to unfreeze risk-adjustment payments with a final rule.

The way the government handled this case makes clear they had more options than they had previously suggested, the plaintiff argued.

The health plan alleges the final rule is 'both procedurally and substantively improper.'

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