The White House announced earlier this month a plan to freeze billions of dollars of risk-adjustment payments scheduled to go to insurers through the Affordable Care Act. These payments are used as a way to encourage insurance companies to accept consumers with chronic illnesses and other preexisting conditions. The freeze comes just as insurance companies are setting their premiums for fall.1
The administration’s decision is based on the ruling from the Federal District Court in New Mexico this past February, in which the judge concluded that the methodology used to calculate the risk-adjustment payments was flawed because it uses the statewide average premium. As a result, $10.4 billion in payments for 2017 are on hold.
“We were disappointed by the [New Mexico] court’s recent ruling,” said Seema Verma, Administrator for Centers for Medicare & Medicaid Services (CMS), in a press release.2 “As a result of this litigation, billions of dollars in risk-adjustment payments and collections are now on hold. 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.”
Insurers depend on these payments to help reduce the burden of taking on large numbers of consumers with chronic or preexisting medical conditions. Without the promise of these expenses covered by the government, the possibility of increased premiums and uncertain markets continues to grow.
CMS filed a motion last month for the New Mexico courts to reconsider the decision. They are now waiting for the court’s decision in this case.
- Pear R. Health Insurers Warn of Market Turmoil as Trump Suspends Billions in Payments. New York Times. July 7, 2018. https://www.nytimes.com/2018/07/07/us/politics/trump-risk-adjustment-payments-obamacare.html. Accessed July 18, 2018.
- Centers for Medicare & Medicaid Services. United States District Court Ruling Puts Risk Adjustment on Hold [news release]. Washington, D.C.: Center for Medicare & Medicaid Services. https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2018-Press-releases-items/2018-07-07.html. Published July 7, 2018. Accessed July 18, 2018