The Trump administration says it has been forced to freeze critical Obamacare payments due to a federal court decision in New Mexico, potentially causing more instability in the program’s fragile markets.
At stake is more than $10 billion in “risk adjustment” payments — a feature of the 2010 health law that requires insurers with healthier consumers to pay into a fund that in turn bolsters plans that ended up with costlier, sicker patients. The idea is to prevent plans from finding ways to cherry-pick only the healthiest customers.
The Centers for Medicare and Medicaid Services, in a rare Saturday announcement, said it had to put the payments on hold, after a U.S. district court judge ruled the government arrived at the formula that guides the payouts in a flawed way.
A federal judge in Massachusetts had reached the opposite conclusion, finding the formula to be fair, though the administration stopped the payments under the New Mexico decision.
“We were disappointed by the court’s recent ruling. As a result of this litigation, billions of dollars in risk adjustment payments and collections are now on hold,” said CMS Administrator Seema Verma. “CMS has asked the court to reconsider its ruling, and hopes for a prompt resolution that allows CMS to prevent more adverse impacts on Americans who receive their insurance in the individual and small group markets.”
While some plans might been expected to pay out money, based on 2017 business, those who anticipated reimbursements would be hurt if the freeze continues.
The ripple comes at a pivotal time for the Affordable Care Act’s marketplace. After years of rate increases, some plans finally had begun to make money under the law.
Yet insurers said Congress’ decision to gut the “individual mandate” to hold insurance — the main prod for getting healthy people to sign up — forced them to request higher-than-usual rates for 2019.
The main insurers’ lobby said it will need to see a quick resolution to avoid bigger price increases next year — and a bigger tab for taxpayers who subsidize qualified customers in the program’s web-based exchanges. Those subsidies rise with premiums.
“This decision will have serious consequences for millions of consumers who get their coverage through small businesses or buy coverage on their own,” said America’s Health Insurance Plans. “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.”
Mr. Trump rode into office on a pledge to repeal and replace Obamacare alongside GOP majorities in Congress, yet legislative efforts fell short last year.
Instead, his administration has tweaked the law where it can, causing insurers to fret and Democrats to cry “sabotage” over changes to their prized program, which has withstood years of political attacks and legal challenges.
Obamacare’s defenders are likely to add the risk-adjustment decision to a growing list of grievances.
Previously, Mr. Trump canceled “cost-sharing” reimbursements for insurers who pick up low-income customers’ out-of-pocket costs, saying he couldn’t legally pay them without an appropriation from the GOP-led Congress, which had zeroed out the money.
And his administration is allowing small employers and sole proprietors band together and buy “association health plans” that are cheaper than what Obamacare offers, since they don’t have to cover the minimum slate of benefits required by the law.
Democrats worry the change will siphon off customers from Obamacare’s exchanges, particularly in combination with a forthcoming rule that will let people hold onto bare-bones “short-term plans” for a full year, instead of just three months.