Insurers warn of turmoil as billions in payments suspended
Robert Pear WASHINGTON — The White House said Saturday it was suspending a program that pays billions of dollars to insurers to stabilize health insurance markets under the Affordable Care Act, a freeze that could increase uncertainty in the markets and drive up premiums this fall.
Many insurers that enroll large numbers of unhealthy people depend on the “risk adjustment” pay ments, which are intended to reduce the incentives for insurers to seek out healthy consumers and shun those with chronic illnesses and other pre-existing conditions.
“Any action to stop disbursements under the risk adjustment program will significantly increase 2019 premiums for millions of individuals and small-business owners, and could result in far fewer health plan choices,” said Justine G. Handelman, a senior vice president of the Blue Cross and Blue Shield Association. “It will under- mine Americans’ access to affordable care, particularly for those who need medical care the most.”
Trump administration offi- cials said they decided to suspend payments under the program because of a ruling in February in U.S. District Court in New Mexico. The judge tossed out the formula used to calculate payments, finding that it was flawed.
“We were disappointed by the court’s recent ruling,” said Seema Verma, the administrator of the Centers for Medicare and Medicaid Services. “As a result of this litigation, billions of dollars in risk adjustment payments and collections are now on hold.”
Verma said her agency had asked the court to reconsider its ruling and was hoping for a prompt resolution of the issue, to “prevent more adverse impacts on Americans who receive their insurance in the individual and small group markets.”
But supporters of the Affordable Care Act said the move was the latest example of the Trump White House’s efforts to undermine the health law.
“The Trump administra- tion just keeps pushing their destructive repeal-and-sabotage agenda, no matter the cost to the American peo- ple,” said Brad Woodhouse, the director of Protect Our Care, an advocacy group that supports the health law. “Following through with this latest act of sabotage could raise rates for all consumers even more.”
Some insurers expressed alarm at the administration’s decision, which comes just as insurance companies are developing premiums for 2019 and states are reviewing proposed rates.
“We are very discouraged by the new market disrup- tion brought about by the decision to freeze risk adjustment payments,” said Matt Eyles, the president and chief executive of America’s Health Insurance Plans, a trade group for insurers.
He predicted that costs to taxpayers would rise because the government provides subsidies that increase along with premiums. Those premium subsidies, for low- and moderate-income people, will continue.
The decision in February, by Judge James O. Browning, voided the formula used by the federal government to calculate risk adjustment payments each year from 2014 to 2018. The amount at stake just for 2017 is $10.4 billion. The payments shuf- fle money among insurers, from those with healthier customers to those with less healthy members who have a higher risk of using costly medical care.
Trump administration officials said they were caught between two conflicting court rulings. The New Mexico ruling prevents the government from making further collections or payments under the risk adjustment program using the current formula, they said. But, they added, in January a federal district judge in Massachusetts upheld the method used by the government to calculate risk adjustment payments.
While insurers warned of market turmoil if the payments were withheld, Martin E. Hickey, the founder of New Mexico Health Connections, the company that filed the lawsuit in that state, said the court ruling there would benefit consumers.
“The risk adjustment formula was extremely biased in favor of large, established insurers and discriminated against new and small insurers, including co-ops like ours,” Hickey said in an interview Saturday.
“People spin the administration’s decision as Trump trying to do harm, but it’s exactly the opposite,” Hickey said. “It will allow more companies to get into the insurance market. That will increase competition, and competition will help keep prices down.”
Risk adjustment payments are based, in part, on the health status of consumers. When the risk adjustment program began in 2014, some large insurers had a potential advantage: They knew the medical and claims history of many consumers because they had insured them in the past.
Browning said the payment formula was flawed because federal officials “assumed erroneously” that collections and payments under the risk adjustment program had to offset each other so there would be no new cost to the federal government.
Trump administration officials said they decided to suspend payments under the program because of a ruling in February in U.S. District Court in New Mexico. The judge tossed out the formula used to calculate payments, finding that it was flawed.