Trump administration halts ACA risk adjustment payments, potentially upending insurance markets

On July 7, CMS announced it will stop making risk adjustment payments, which were designed as part of the Affordable Care Act (ACA) to help insurers that accept more high-cost patients avoid major losses.

The funds, which are pooled from all insurance plans and do not include tax money, are essential in stabilizing the ACA marketplaces. As insurers begin to set premiums and forecast enrollment for 2019, this payment freeze could increase uncertainty—and premiums for consumers.

CMS made the decision after a federal court found the risk adjusted payments were based on flawed equations.

“CMS is seeking a quick resolution to the legal issues raised and will inform stakeholders of any update to the status of collections or payments at an appropriate future date,” the agency said in a statement.

Because the payments are required by law, some industry experts believe the administration has legal authority to make the payments, which accounted for $10.4 billion in 2017. Earlier this year, a district court in Massachusetts upheld the payment formula.

The freeze, though, could be seen as an attempt by the Trump administration to destabilize the ACA after years of political attacks from Republicans and numerous failed attempts to repeal the law.

America’s Health Insurance Plans, the largest health insurance lobbying group, released a statement criticizing the timing of the decision.

“This decision comes at a critical time when insurance providers are developing premiums for 2019 and states are reviewing rates,” according to AHIP’s statement. “This decision will have serious consequences for millions of consumers who get their coverage through small businesses or buy coverage on their own. 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. And costs for taxpayers will rise as the federal government spends more on premium subsidies.”

Blue Cross Blue Shield also denounced the decision.

“This action will significantly increase 2019 premiums for millions of individuals and small business owners and could result in far fewer health plan choices,” said Scott Serota, Blue Cross Blue Shield Association CEO, in a statement. “[CMS] should take immediate action to reinstate these payment transfers to ensure the market works as intended.”

Larry Levitt, senior VP at the Kaiser Family Foundation, questioned the motivation behind such a move.

"Normally you would expect an administration to look for ways to minimize the uncertainty and minimize the effect as these cases play out," he said. "So it seems like an extreme step to halt this program nationally based on a decision by one district court judge."