Trump administration suspends ACA risk-adjusted payments

Pearl Mccarthy
July 14, 2018

"We believe they overstate the risk that CMS will not make risk adjustment transfers or the move will upend the Affordable Care Act insurance markets".

Over the weekend, the administration said it would freeze risk adjustment payments to insurers that cover a large amount of unhealthy consumers - payments meant to stabilize the marketplace by offsetting higher costs associated with riskier patients.

Insurers rely on the funding, which serves as a backstop for those who wind up with a high share of costly enrollees.

Under the risk adjustment program, insurers with healthier patients pay those with sicker patients.

In other words, Medicaid, CHIP and whatever other federal assistance is provided would be transformed into voucher programs, which has been the main aim of Trump and congressional Republicans. These plans have been allowed under the law, but can only last a limited duration of three months, but the administration is going to publish a regulation in the coming weeks allowing consumers to enroll in these plans for a full year.

The program, which was created to be a permanent feature of the Affordable Care Act, transfers money from health plans with lower-risk consumers to plans with higher-risk consumers. They are now deciding which exchanges they will participate in next year and what premiums they'll charge.

Insurers decried the move, and have been pressing the administration to resolve the issue and resume the payments, arguing that premiums will rise for ObamaCare enrollees if funding is cut off. "It will undermine Americans' access to affordable coverage, particularly those who need medical care the most". It's also taken other actions recently that will increase costs.

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Even with these concerns, insurers are more confident about participating in Obamacare. The nonprofit insurer sued the government in 2016 claiming the risk adjustment program unfairly penalized smaller insurers.

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Insurance Commissioner Al Redmer Jr. said that as of now he doesn't expect the latest decision to interrupt the state's rate-setting process. Some companies that had expected hundreds of millions of dollars in risk-adjustment payments fear the funds may fall through, while others that had expected to owe hundreds of millions wonder if they may be off the hook.

Anthem, one of the largest carriers in the individual market, could lose out on $500 million in payments, according to a JPMorgan analyst estimate. Anthem declined comment on its specific circumstances.

Molina, on the other hand, won't have to send almost $1 billion, while Centene can avoid paying hundreds of millions of dollars to the program ... at least for now, JPMorgan projected.

Some co-ops have sued on grounds that the funding formula is unfair to small insurers.

CMS Administrator Seema Verma said the navigators that operate in the 34 states that use the federal marketplace - including many health and religious organizations - were ineffective and had outlived their usefulness.

"The insurance business is about predictability and certainty and this is just one more twist", Connolly said.

But CareFirst and Kaiser could ask to adjust their rates higher given the Trump administration's decision.

She noted the Trump administration views state flexibility as important, and is committed to granting as much of it as possible.

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