PROVIDENCE — The Trump administration is resuming $10.4 billion in Affordable Care Act risk management payments halted earlier this month after a New Mexico court ruled them invalid for lacking explanation of the budget-neutral process, solving the impasse by adding that explanation.
On July 13, when the Centers for Medicare & Medicaid Services, or CMS, halted the payments, Healthsource RI spokesperson Kyrie Perry said the decision could destabilize the individual health care marketplace. Now, that destabilizing threat is dispelled.
“The Center for Medicare and Medicaid Services’ (CMS) decision to resume making $10B in risk adjustment payments two weeks after announcing their suspension is a welcome one. The termination of payments would leave some Rhode Island health insurers facing financial shortfalls, resulting in negative implications for persons and small businesses as they seek insurance for 2019,” said Marie L. Ganim, the Rhode Island health insurance commissioner.
Insurers had warned they might have to raise ACA premiums for 2019 if the dispute wasn’t resolved quickly. The risk-adjustment program transfers money from insurers with healthier customers to ones with sicker customers, and doesn’t cost the federal government money, referred to as budget-neutral. It’s designed to ensure that health plans don’t seek to sign up only healthy customers for their plans.
“The federal government’s abrupt announcement of the payments’ suspension caused concern across the country, as states are currently considering approving health insurance costs and premiums for 2019,” Ganim said.
“Not knowing whether these federal adjustments (which move funds from insurers with healthier members to those who cover sicker patients) would be made is just the latest example of CMS’s troubling pattern of implementing health insurance policies that contribute to market instability. OHIC will continue to work to protect consumers and our health insurance market from the disruptive federal policies,” Ganim added.
CMS announced the temporary action following a Feb. 28 New Mexico District Court ruling in New Mexico Health Connections vs. the U.S. Department of Health and Human Services invalidating use of the statewide average premium by the CMS in the established risk adjustment transfer formula.
According to new guidance on the risk-sharing program posted to the CMS website, HHS chose a statewide average premium so that each plan’s enrollment characteristics are compared to the state average and the total calculated risk management payment amounts equal total calculated charges in each state risk pool. Each plan in the risk pool receives a risk adjustment payment, or charge, designed to compensate for risk for a plan with average risk in a budget-neutral manner.
The court ruled against using the statewide average premium on the grounds that HHS did not adequately explain its decision to adopt the budget-nuetral aspect of the risk adjustment methodology.
“Accordingly, HHS is providing additional explanation herein,” the guidance reads.
First, Congress designed the risk-management process as voluntary, according to the guidance. Second, since Congress omitted any provision appropriating independent funding or creating budget authority for the risk adjustment program, HHS did not have discretion to implement a risk-sharing program that was not budget neutral.
“This rule will restore operation of the risk-adjustment program,” CMS Administrator Seema Verma said in a statement. “Issuers that had expressed concerns about having to withdraw from markets or becoming insolvent should be assured by our actions today.”
Rob Borkowski is a PBN staff writer. Email him at Borkowski@PBN.com. Bloomberg News contributed to this article.
Correction: In a previous version of this story, quotes by OHIC’s Marie Ganim were incorrectly attributed.