Medicine

The Health Insurers Squawk

The Health Insurers Squawk

The Centers for Medicare & Medicaid Services announced over the weekend that it was freezing billions of dollars in so-called risk adjustment payments for plans under the Affordable Care Act, also known as Obamacare, because of a court decision earlier this year that deemed the formula for determining these payments unlawful.

On Feb. 28, 2018, a federal judge in New Mexico decided that the use of the statewide average premium formula to calculate risk adjustment payments was flawed.

The risk adjustment program plays an important role in the ACA by pooling risk for insurers, transferring funds from insurers who enroll healthier members for relatively less, to those that take on higher costs in order to enroll sicker members. While the administration says it is required to stop payments because of the court decision, insurers say the move could result in higher premiums for millions of individuals and small businesses.

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The New York Times suggested the payment freeze could "increase uncertainty in the markets and drive up premiums this fall".

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The Trump administration has made no secret of its hostility to the healthcare program, enacted in 2010. "It will allow more companies to get into the insurance market".

"An effective risk adjustment program is crucial to the sound operation of a health insurance marketplace in which individuals, families and small businesses with health needs have access to more affordable, high-quality coverage", said Bill Wehrle, Kaiser Permanente vice president of health insurance exchanges, in a statement. It added that the move comes at a critical time when insurance providers are developing premiums for 2019 and states are reviewing rates.

The federal court ruling prevents the agency, which administers the Obamacare risk-adjustment program, from making further collections or payments, including those for the 2017 benefit year, until the litigation is resolved, the agency said.

The Trump administration has halted billions of dollars of Obamacare payments to insurers due to a court ruling.

The president last fall also issued an executive order to try to make it easier for individuals and small businesses to buy health plans that cost less than ACA coverage because they cover fewer medical services and bypass the law's rules meant to protect people from old insurance practices in which companies had charged higher prices to women, older people, and those with preexisting medical conditions. But the U.S. Supreme Court upheld the law, finding that the fine consumers faced for not buying insurance was actually a tax. "And costs for taxpayers will rise as the federal government spends more on premium subsidies", the group said. The CMS has asked Judge Browning to reconsider his ruling and is awaiting a decision.