The Trump administration announced on Saturday another potential blow to the Affordable Care Act - the freezing of risk-adjustment payments that help stabilize insurance pools in the marketplace. Citing conflicting federal court decisions on the program, the CMS said it can not collect or disburse funds under the risk-adjustment program.
The Trump administration is halting billions of dollars in payments required under the ACA, citing a district court decision in New Mexico from earlier this year.
The Risk adjustment formula is a key component of Obamacare, allowing for market stabilization. "As a result of this litigation, billions of dollars in risk adjustment payments and collections are now on hold", CMS administrator Seema Verma reportedly said in a statement. Small insurers often complain about risk adjustment payments because they end up paying their larger competitors, who tend to have the sickest patients.
In January this year, the federal district judge in MA upheld the methodology used by the federal government to calculate risk adjustment payments.
Trump tweeted dozens and dozens of times about Obamacare and its demise a year ago as he pushed the Senate to repeal the law. "In light of this analysis, the Government can not lawfully make the cost-sharing reduction payments", the White House said after ending the payments in October 2017.
The Trump administration's move "will significantly increase 2019 premiums for millions of individuals and small business owners and could result in far fewer health plan choices", association president Scott Serota said in a statement. The Trump administration claims it is obligated to suspend these payments because of a court ruling out of New Mexico questioning their legality, but there is reason to be skeptical.
The trade group America's Health Insurance Plans said in an emailed statement that "We are very discouraged by the new market disruption brought about by the decision to freeze risk adjustment payments". It will create more market uncertainty and increase premiums for many health plans - putting a heavier burden on small businesses and consumers, and reducing coverage options. It's a move that could shake up insurance markets. The White House supported two attempts in Congress a year ago to repeal the program, which insures about 20 million Americans. "There is a need to analyze insurers case-by-case and account for their competitive landscapes", said Tinglong Dai, an associate professor of operations management and business analytics at the Johns Hopkins University Carey Business School.
Still, insurers are grappling with changes that the Trump administration and Congress have made to Obamacare for 2019.