The Trump administration took another major swipe at the Affordable Care
Act, halting billions of dollars in annual payments required under the
law to even out the cost to insurers whose customers need expensive
medical services.
In a rare Saturday afternoon announcement, the Centers for Medicare and
Medicaid Services said it will stop collecting and paying out money
under the ACA’s “risk adjustment” program, drawing swift protest from
the health insurance industry.
Risk adjustment is one of three methods built into the 2010 health-care
law to help insulate insurance companies from the ACA requirement that
they accept all customers for the first time — healthy and sick —
without charging more to those who need substantial care.
The other two methods were temporary, but risk adjustment is permanent.
Federal health officials are required each year to calculate which
insurers with relatively low-cost consumers must chip in to a fund, and
which ones with more expensive customers are owed money. This idea of
pooling risk has had significant practical effects: encouraging insurers
to participate in the insurance marketplaces the ACA created for
Americans who cannot get affordable health benefits through a job.
In its announcement, CMS said that it is not going to make $10.4 billion
in payments that are due to insurers in the fall for expenses incurred
by insurers last year.
CMS, a branch of the Department of Health and Human Services that
oversees much of the law, is supposed to issue an annual report on the
program but has not released a report due late last month.
The suspension of these payments is the most recent maneuver by the
Trump administration to undercut the health-care law that President
Trump has vowed since his campaign to demolish. A Republican-led
Congress last year failed to repeal much of the ACA. The administration
has been taking steps to dismantle it through executive powers.
Last year, health officials halved the length of the annual sign-up
period for Americans to buy ACA health plans and also slashed by 90
percent the federal funds for advertising and other outreach efforts to
urge people to enroll. Last October, the president ended another
important subsidy to insurers: cost-sharing reduction payments, which
cushioned them from the law’s requirement to provide discounts on
deductibles and other out-of-pocket costs to low-income customers.
This year, the Department of Labor and HHS have worked to make it easier for people and small companies to buy two types of insurance policies that sidestep benefits required under the ACA and some of the law’s consumer protections.
The five-paragraph statement plus a timeline issued on Saturday
justified the latest maneuver by tying it to a legal dispute over the
fairness of the risk-adjustment formula. The dispute goes back about
three years to a new type of nonprofit insurer, known as Consumer
Oriented and Operated Plans (co-ops), created by the ACA as alternatives
to traditional insurance companies. Most of the co-ops found themselves
in such fragile financial condition that
they closed, and a few that have survived sued the government, alleging
they were unfairly making contributions into the risk-adjustment fund
while larger, better-established insurers were receiving payments.
In two cases, federal district judges in Massachusetts and New Mexico
reached opposite conclusions. The Massachusetts judge found the HHS
formula fair, but the one in New Mexico ruled that it was “arbitrary and
capricious.” Federal health officials are asking that the New Mexico
ruling be reconsidered.
The announcement says that “ruling prevents CMS from making further
collections or payments under the risk adjustment program.” CMS
Administrator Seema Verma said in a statement: “As a result of this
litigation, billions of dollars in risk adjustment payments and
collections are now on hold.”
Two major insurers’ trade groups immediately decried the move.
“Risk adjustment is a mandatory program under federal law,” said Scott
Serota, president of the Blue Cross Blue Shield Association. “Without a
quick resolution . . . this action will significantly increase 2019
premiums for millions of individuals and small business owners. . . . It
will undermine Americans’ access to affordable coverage, particularly
for those who need medical care the most.”
Matt Eyles, president of America’s Health Insurance Plans, noted in a
statement that the timing of this latest move could be particularly
disruptive, because this is the season during which insurers around the
country decide whether to take part in ACA marketplaces for 2019 and, if
so, what rates to charge. “This decision . . . will create more market
uncertainty and increase premiums for many health plans,” Eyles said.