CMS Reverses Decision, Reinstates Risk-Adjustment Payments

The Trump Administration has reversed a decision made earlier this month to cease payments to insurers through the ACA’s risk-adjustment reimbursement program.

On July 9, CMS stopped $10.4 billion in payments to insurers, citing two court cases that ruled that the program’s methodology was flawed. The new final rule reinstates the risk-adjustment program and updates its methodology.

This program was established as part of the ACA in order to compensate payers for enrolling high-risk patients with chronic conditions in an
effort to reduce the risk that payers would avoid enrolling these patients. Further, the payments are funded by subsidies from payers that enroll low-risk patients, and therefore the program does not use taxpayer funds.

According to CMS, the new final rule will not go through the typical comment and notice period due to the urgent need for the risk-adjustment program to be reinstated. 

“HHS has determined that issuing this rule in proposed form, such that it would not become effective until after public comments are submitted, considered, and responded to in a final rule, would be impracticable, unnecessary, and contrary to the public interest,” the HHS wrote in the final rule. “As discussed above, immediate administrative action is imperative to maintain the stability and predictability in the individual and small group insurance markets.”

The payments that are currently due to insurers are adjustments made on 2017 premiums. CMS also noted that if they did not immediately reinstate the risk-adjustment program, premiums for 2019 could increase significantly.

“Immediate action is also necessary to maintain issuer confidence in the HHS-operated risk adjustment program,” the HHS wrote in the final rule. “[Insurers] have already accounted for expected risk adjustment transfers in their rates for the 2017 benefit year and uncompensated payments for the 2017 benefit year could lead to higher premiums in future benefit years as issuers incorporate a risk premium into their rates… there is a serious risk [insurers] will substantially increase 2019 premiums to account for the uncompensated risk associated with high-risk enrollees.”

CMS Administrator Seema Verma, MPH, said that reinstating the rule should keep 2019 premiums from spiking.

“This rule will restore operation of the risk adjustment program, and mitigate some of the uncertainty caused by the New Mexico litigation,” she said in a press release. “Issuers that had expressed concerns about having to withdraw from
markets or becoming insolvent should be assured by our actions today. Alleviating concerns in the market helps to protect consumer choices.”

—David Costill