Ad­min­is­tra­tion takes an­other big swipe at ACA

‘Risk-ad­just­ment’ pay­ments halted to health in­sur­ers with high costs

The Washington Post Sunday - - POLITICS & THE NATION - BY AMY GOLD­STEIN amy.gold­stein@wash­post.com

The Trump ad­min­is­tra­tion took an­other ma­jor swipe at the Af­ford­able Care Act, halt­ing bil­lions of dol­lars in an­nual pay­ments re­quired un­der the law to even out the cost to in­sur­ers whose cus­tomers need ex­pen­sive med­i­cal ser­vices.

In a rare Sat­ur­day af­ter­noon an­nounce­ment, the Cen­ters for Medi­care and Med­i­caid Ser­vices said it will stop col­lect­ing and pay­ing out money un­der the ACA’s “risk ad­just­ment” pro­gram, draw­ing swift protest from the health in­sur­ance in­dus­try.

Risk ad­just­ment is one of three meth­ods built into the 2010 health-care law to help in­su­late in­sur­ance com­pa­nies from the ACA re­quire­ment that they ac­cept all cus­tomers for the first time — healthy and sick — with­out charg­ing more to those who need sub­stan­tial care.

The other two meth­ods were tem­po­rary, but risk ad­just­ment is per­ma­nent. Fed­eral health of­fi­cials are re­quired each year to cal­cu­late which in­sur­ers with rel­a­tively low-cost con­sumers must chip in to a fund, and which ones with more ex­pen­sive cus­tomers are owed money. This idea of pool­ing risk has had sig­nif­i­cant prac­ti­cal ef­fects: en­cour­ag­ing in­sur­ers to par­tic­i­pate in the in­sur­ance mar­ket­places the ACA cre­ated for Amer­i­cans who can­not get af­ford­able health ben­e­fits through a job.

In its an­nounce­ment, CMS said that it is not go­ing to make $10.4 bil­lion in pay­ments that are due to in­sur­ers in the fall for ex­penses in­curred by in­sur­ers last year.

CMS, a branch of the Depart­ment of Health and Hu­man Ser­vices that over­sees much of the law, is sup­posed to is­sue an an­nual re­port on the pro­gram but has not re­leased a re­port due late last month.

The sus­pen­sion of these pay­ments is the most re­cent ma­neu­ver by the Trump ad­min­is­tra­tion to un­der­cut the health-care law that Pres­i­dent Trump has vowed since his cam­paign to de­mol­ish. A Repub­li­can-led Con­gress last year failed to re­peal much of the ACA. The ad­min­is­tra­tion has been tak­ing steps to dis­man­tle it through ex­ec­u­tive pow­ers.

Last year, health of­fi­cials halved the length of the an­nual sign-up pe­riod for Amer­i­cans to buy ACA health plans and also slashed by 90 per­cent the fed­eral funds for ad­ver­tis­ing and other out­reach ef­forts to urge peo­ple to en­roll. Last Oc­to­ber, the pres­i­dent ended an­other im­por­tant sub­sidy to in­sur­ers: cost-shar­ing re­duc­tion pay­ments, which cush­ioned them from the law’s re­quire­ment to pro­vide dis­counts on de­ductibles and other out-of­pocket costs to low-in­come cus­tomers.

This year, the Depart­ment of La­bor and HHS have worked to make it eas­ier for peo­ple and small com­pa­nies to buy two types of in­sur­ance poli­cies that sidestep ben­e­fits re­quired un­der the ACA and some of the law’s con­sumer pro­tec­tions.

The five-para­graph state­ment plus a time­line is­sued on Sat­ur­day jus­ti­fied the lat­est ma­neu­ver by ty­ing it to a le­gal dis­pute over the fair­ness of the risk-ad­just­ment for­mula. The dis­pute goes back about three years to a new type of non­profit in­surer, known as Con­sumer Ori­ented and Op­er­ated Plans (co-ops), cre­ated by the ACA as al­ter­na­tives to tra­di­tional in­sur­ance com­pa­nies. Most of the co-ops found them­selves in such frag­ile fi­nan­cial con­di­tion that they closed, and a few that have sur­vived sued the gov­ern­ment, al­leg­ing they were un­fairly mak­ing con­tri­bu­tions into the risk-ad­just­ment fund while larger, bet­ter-es­tab­lished in­sur­ers were re­ceiv­ing pay­ments.

In two cases, fed­eral dis­trict judges in Mas­sachusetts and New Mex­ico reached op­po­site con­clu­sions. The Mas­sachusetts judge found the HHS for­mula fair, but the one in New Mex­ico ruled that it was “ar­bi­trary and capri­cious.” Fed­eral health of­fi­cials are ask­ing that the New Mex­ico rul­ing be re­con­sid­ered.

The an­nounce­ment says that “rul­ing pre­vents CMS from mak­ing fur­ther col­lec­tions or pay­ments un­der the risk ad­just­ment pro­gram.” CMS Ad­min­is­tra­tor Seema Verma said in a state­ment: “As a re­sult of this lit­i­ga­tion, bil­lions of dol­lars in risk ad­just­ment pay­ments and col­lec­tions are now on hold.”

Two ma­jor in­sur­ers’ trade groups im­me­di­ately de­cried the move.

“Risk ad­just­ment is a manda­tory pro­gram un­der fed­eral law,” said Scott Serota, pres­i­dent of the Blue Cross Blue Shield As­so­ci­a­tion. “With­out a quick res­o­lu­tion . . . this ac­tion will sig­nif­i­cantly in­crease 2019 pre­mi­ums for mil­lions of in­di­vid­u­als and small busi­ness own­ers . . . . It will un­der­mine Amer­i­cans’ ac­cess to af­ford­able cov­er­age, par­tic­u­larly for those who need med­i­cal care the most.”

Matt Eyles, pres­i­dent of Amer­ica’s Health In­sur­ance Plans, noted in a state­ment that the tim­ing of this lat­est move could be par­tic­u­larly dis­rup­tive, be­cause this is the sea­son dur­ing which in­sur­ers around the coun­try de­cide whether to take part in ACA mar­ket­places for 2019 and, if so, what rates to charge. “This de­ci­sion . . . will cre­ate more mar­ket un­cer­tainty and in­crease pre­mi­ums for many health plans,” Eyles said.

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