Major insurers won’t be impacted negatively by halted ACA risk adjustment payments

The largest U.S. health insurers aren’t likely to be at risk of negative credit ratings after the Trump administration halted about $10 billion in risk adjustment payments, according to Fitch Ratings.

“The major publicly traded health insurers and Blue Cross/Blue Shield plans do not appear to face a concerning level of deterioration in capital strength under any plausible scenario,” a Fitch report reads.

However, smaller companies that are currently owed money under the Affordable Care Act (ACA) risk-adjustment transfers program could be at risk.

The payments are intended to help insulate insurers from losses, and without them, providers may no longer be incentivized to cover a higher-cost membership base.

On July 7, the Trump administration claimed it could not make the payments as a result of a federal court ruling that precluded CMS from collecting and distributing funds.

Some insurance carriers stand to lose payments, though the amounts are unlikely to be material for large companies, according to Fitch.

“Although the amounts represent a significant portion of 2017 earnings, given the magnitude of the capital base for these companies, the potential receivables do not represent a material portion of the insurers' overall capital position,” the Fitch report reads. “The loss of these payments is unlikely to drive risk-adjusted capitalization levels to concerning levels.”

In fact, some carriers may even benefit, as those that carry lower-cost beneficiaries may not have to pay into the risk-adjustment program fund in the short term.

Physicians see the payment halt as a major disruption to affordable healthcare coverage. Six organizations representing more than 560,000 physicians and medical students signed a letter urging CMS to reverse its decision to halt the risk-adjustment payments. The groups stated vulnerable patients could be at risk and premiums could rise.

“The funds help protect patients by allowing insurers to compete without cherry-picking health consumers over those with chronic illnesses and pre-existing conditions,” the letter reads.

The American Academy of Family Physicians, American Academy of Pediatrics, American College of Obstetricians and Gynecologists, American College of Physicians, American Osteopathic Association and American Psychiatric Association made up the coalition.

The federal case cited by CMS is currently under appeal, and the long-term outlook for the risk-adjustment program is still up in the air.