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Analysis

Uncertainty Reigns After $10B in ACA Risk Adjustments Frozen

By Steven Porter  
   July 09, 2018

Health insurers could look to raise their 2019 premiums if the Trump administration doesn't follow through on payments that were supposed to be a permanent feature of the healthcare law.

There's a great deal of uncertainty among health insurers after the Centers for Medicare & Medicaid Services confirmed over the weekend that it would halt $10.4 billion in planned risk-adjustment payments for the 2017 benefit year.

The announcement came Saturday evening after The Wall Street Journal reported Friday that the Trump administration was expected to suspend the Affordable Care Act program, prompting concerned insurers to call for a quick resolution and critics to accuse the government of further chipping away at the ACA's foundation.

"We are very discouraged by the new market disruption brought about by the decision to freeze risk adjustment payments. This decision comes at a critical time when insurance providers are developing premiums for 2019 and states are reviewing rates," the Association of Health Insurance Plans said in a statement, adding that the move will affect millions of consumers.

"It will create more market uncertainty and increase premiums for many health plans—putting a heavier burden on small businesses and consumers, and reducing coverage options. And costs for taxpayers will rise as the federal government spends more on premium subsidies," AHIP said.

Blue Cross Blue Shield Association President and CEO Scott Serota said the association is "extremely disappointed" in the Trump administration's decision, noting that risk adjustment is required by law.

"Without a quick resolution to this matter, this action will significantly increase 2019 premiums for millions of individuals and small business owners and could result in far fewer health plan choices," Serota said in a statement. "It will undermine Americans' access to affordable coverage, particularly for those who need medical care the most."

The Stated Rationale
 

The CMS announcement cited a four-month-old decision by a federal judge in New Mexico as the basis for putting risk-adjustment payments on hold.

Although a federal judge in Massachusetts sided with CMS in January and ruled that the federal government acted within its authority when it created its risk-adjustment methodology in 2013 based on statewide average premiums, the federal judge in New Mexico barred CMS in February from collecting or making payments using that methodology, CMS said.

"As a result of this litigation, billions of dollars in risk adjustment payments and collections are now on hold," CMS Administrator Seema Verma said in Saturday's announcement.

"CMS has asked the court to reconsider its ruling, and hopes for a prompt resolution that allows CMS to prevent more adverse impacts on Americans who receive their insurance in the individual and small group markets," Verma added.

The government is waiting on the New Mexico judge to issue an additional ruling after a hearing was held June 21 on the government's motion to reconsider, CMS said.

Critics Cry 'Sabotage'
 

While acknowledging that the contradictory opinions issued by the judges in Massachusetts and New Mexico present a legitimate legal obstacle course, proponents of the ACA accused the Trump administration of taking an unnecessary action to weaken the oft-derided Obama-era law.

"It’s an excuse," University of Michigan health law professor Nicholas Bagley told the Journal over the weekend. The administration's claim that its hands are tied is false, Bagley said in a blog post Monday arguing that CMS still has "lots of options."

Jon Kingsdale, PhD, a former state health official in Massachusetts, told The Huffington Post that the administration "seems to be jumping at yet another opportunity" to undermine the ACA.

"On top of a half-dozen other hits to the ACA marketplace, this will add to health plans' anxieties about getting stuck with a deteriorating risk pool," Kingsdale said.

Andy Slavitt, who served as an acting CMS administrator in the Obama administration, described the freezing of risk-adjustment payments as "aggressive and needless sabotage" likely to cause chaos.

Slavitt drew a comparison between this move and a number of others by the Trump administration, including the Department of Justice's decision last month to abandon key provisions of the ACA; the cessation of cost-sharing reduction (CSR) payments last fall; and the push for cheaper alternatives to ACA-compliant plans.

Slavitt said the administration could resolve the present uncertainty over risk-reduction payments by issuing an interim final rule.

"But instead Trump is using this as a big bullet in hopes of finally killing the ACA," he said in a tweet.

What's to Come?
 

Katie Keith, JD, MPH, wrote for HealthAffairs that issuing a clarification could be the quickest way for CMS to address the New Mexico judge's concerns and ensure that insurers receive their payments for 2017 and 2018 in a timely fashion.

"Although the ongoing litigation raises the question of whether there will be a delay in risk adjustment transfers for 2017 and 2018, the payments themselves should not be at risk," Keith wrote.

Larry Levitt, senior vice president for the Kaiser Family Foundation, said in a tweet that how this story unfolds will depend on what the government does next.

"The key thing to watch is whether the Trump administration uses the legal dispute as an excuse to cancel payments to insurers and create chaos, or instead tries to work through the legal process and make the payments as planned," he wrote.

Editor's note: This story has been updated to include additional information attributed to Nicholas Bagley. John Commins contributed to this report.

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


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