The Trump administration said Saturday it's freezing payments under an "Obamacare" program that protects insurers with sicker patients from financial losses, a move expected to add to premium increases next year.
The risk adjustment program redistributes funds from plans with lower-risk enrollees to plans with higher-risk enrollees. The idea is to insulate insurance companies from the cost of enrolling people with pre-existing conditions, and remove the incentive for insurance companies to cherry pick healthy people. This is the second round of cuts, after CMS reduced funding for navigators by 41 percent, from $62.5 million, last August, and also cut the budget for Obamacare outreach and advertising by 90 percent.
The Blue Cross Blue Shield Association, whose members are a mainstay of Affordable Care Act coverage said it was "extremely disappointed" with the administration's action.
"As the Exchange has grown in visibility and become more familiar to Americans seeking health insurance, the need for federally funded Navigators has diminished", CMS said in a statement on Tuesday.
The program is critical to markets under the Affordable Care Act because insurers with healthier consumers enrolled in plans reimburse insurers with sicker and more expensive enrollees.
Some health care experts, however, believe that risk adjustment has caused more damage than good and needs urgent fixing.
Nationally, insurance industry officials quickly denounced the Trump administration's move and warned that the decision would drive up premiums.
Trump administrators suspended the payments over a February ruling by a federal district court in New Mexico, according to the reports. Another court in MA had upheld the program in January. The ruling barred Centers for Medicare and Medicaid Services (CMS) from making further collections or payments under the program, including amounts for the 2017 benefit year, until the litigation is resolved.
Levitt says the administration's announcement was "a little perplexing", given that the legal fight over the conflicting rulings in New Mexico and MA is still ongoing. "It will allow more companies to get into the insurance market". The Maryland Insurance Administration has a hearing scheduled for July 31. "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".
The Republican-led Congress failed previous year to repeal and replace the ACA. Paying off companies that lose money was supposed to be a temporary adjustment to changing markets.
Insurance Commissioner Al Redmer Jr. said that as of now he doesn't expect the latest decision to interrupt the state's rate-setting process.
These moves are prompting some insurers to request premium hikes for 2019 in the double digits.
"We have to be very cautious".
There have been winners and losers in risk adjustment.
The payments can be controversial, Dai said.