On Saturday, July 7, the Trump administration announced that it was temporarily suspending $10.4 billion in risk adjustment payments for insurers for plan year 2017, citing a ruling in the U.S. District Court of New Mexico.
The ruling was issued in February 2018, with a decision invalidating use of the statewide average premium by the Center for Medicare & Medicaid Services (CMS) in risk adjustment payment calculation for plan years 2014 to 2018. As a result, the Trump administration decided to withhold payments under the program when the formula to calculate the payments was proved to be flawed in the court. Despite this, the U.S. District in Massachusetts upheld CMS from the beginning of 2018.
The risk adjustment program is originally intended to “lessen or eliminate the influence of risk selection on the premiums that plans charge” in health insurance markets under the Affordable Care Act (ACA), so that it encourages insurers to cover people with pre-existing and chronic conditions by pooling risk with other insurers with healthy enrollees.
Obviously, this program doesn’t cost the federal government money; but since arriving to the White House, Trump has declared war on ACA, especially after the Republican-controlled Congress failed to repeal and replace Obamacare.
Rodney Whitlock, Vice President of Health Policy at ML Strategies and former Republican congressional aide says: “What you have to keep in mind is ultimately the intent of the administration,” where the goal has been to make the marketplace as inhospitable as possible for participating plans.
A statement from the executive director of the pro-ACA group Protect Our Care on Saturday: “The Trump administration just keeps pushing their destructive repeal-and-sabotage agenda, no matter the cost to the American people…Following through with this latest act of sabotage could raise rates for all consumers even more – on top of the rate hikes they have already caused – and is without a doubt an escalation in the Trump administration’s war on people with pre-existing conditions.”
Health Insurance Markets
Insurers say this program put on hold could increase both the premiums and the uncertainty in the markets.
Justine G. Handelman, a senior vice president of the Blue Cross and Blue Shield Association “Any action to stop disbursements under the risk adjustment program will significantly increase 2019 premiums for millions of individuals and small-business owners, and could result in far fewer health plan choices,”
“We were disappointed by the court’s recent ruling,” said Seema Verma, the administrator of the Centers for Medicare and Medicaid Services. Her agency has asked the court for another prompt solution for this issue to “prevent more adverse impacts on Americans who receive their insurance in the individual and small group markets.”
Larry Levitt, Senior Vice President at the Kaiser Family Foundation responded to the move: “Insurers hate uncertainty, and when faced with it tend to raise premiums to hedge their bets. When the rules of the game change after the fact – insurers don’t necessarily see the federal government as a particularly reliable partner.” As a result, this move might cause the insurers not to participate next year.
Insurers warn that smaller companies which have lots of enrollees with pre-existing conditions are likely susceptible the most to the risk. On the other side, Dr. Martin E. Hickey, the founder of New Mexico Health Connections, the company that filed the lawsuit, said: “ The risk adjustment formula was extremely biased in favor of large, established insurers and discriminated against new and small insurers, including co-ops like ours. It will allow more companies to get into the insurance market. That will increase competition, and competition will help keep prices down.”
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