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Health Insurers Push Back Against Freeze of Federal Payments

Companies say the administration's decision to suspend the $10 billion risk-adjustment program could lead to higher premiums and upheaval in the country's insurance markets.
July 11, 2018

Health insurers in Oregon and nationally are pushing back against a Trump administration decision affecting a key piece of the Affordable Care Act. If not challenged, they say, the decision could result in higher premiums and widespread instability to the country’s insurance markets.

The alarm comes in reaction to an announcement last weekend from the U.S. Centers for Medicare and Medicaid Services. Seema Verma, the agency’s administrator, suspended the $10 billion risk adjustment program, which helps guarantee that sicker, high-cost enrollees can obtain health insurance.

The decision puts Oregonians at risk by injecting instability into the health insurance market, said Andrew Stolfi, Oregon’s insurance commissioner. He added that the administration’s decision, issued in a breezy news release on Saturday, caught him by surprise.

“We are pursuing all avenues to prevent additional unwarranted increases to 2019 rates,” Stolfi said.

Supporters of the frozen program point out that it is revenue-neutral, meaning it does not involve any taxpayer dollars.

The program, written as a fundamental part of the 2010-passed ACA, is intended to transfer funds from health insurers with low-risk enrollees to insurers who provide health coverage to relatively high-risk enrollees.

Companies providing health insurance in Oregon, as well as those providing insurance in all other states, rely on a government-devised risk adjustment formula. That formula determines whether their enrollees require them either to pay money into, or collect money from, the risk adjustment fund.

Most insurers supported adding risk adjustment to the ACA and continue to say it adds the certainty needed to keep markets stable.

The decision to freeze those payments comes at a particularly critical time for Oregon residents, since the state is now in the late stages of setting health insurance rates for 2019.

“There is no doubt that this has introduced an element of market instability,” said Ken Provencher, president and chief executive of PacificSource Health Plans in Bend. “But in the long run, this is an important program. It’s important to market stability.”

In PacificSource’s case, the payment freeze would prove beneficial, at least in the short term. That’s because the company was scheduled to have to pay $9 million this year to health plans with high-risk members.

In both of the two prior years, by contrast, PacificSource ended up receiving money.

“It’s all dependent on the population you end up covering,” said Provencher, whose company provides medical and dental benefits to more than 3,900 Northwest employers.

Provencher declined to comment when asked whether the administration’s decision to freeze risk-adjustments amounted to yet one more attempt to undermine the Affordable Care Act.

“I’m not sure I can speak to anyone’s motivations,” he said. “But my hope is that, in the long run, we would go ahead with what’s in place and enhance it where it needs to be improved.”

Others noted that risk adjustment is required under the ACA, which remains the signature legislative accomplishment of former President Barack Obama. The Republican-led Congress failed last year to repeal the act, leaving the Trump administration to use executive powers to diminish or abolish it altogether.

The administration, in freezing risk-adjustment payments and collections, cited a decision by a federal court judge in New Mexico, who ruled that the formula involved was “arbitrary and capricious.”

Others, including Stolfi, pointed out that a Massachusetts court, in a separate ruling, found the federal risk-adjustment formula to be proper.

Still, the turmoil caused by the payment freeze is taking a toll on efforts to cover as many people as possible, according to other health insurance providers.

“We are concerned that CMS’ announcement this weekend delaying risk adjustment payments could create greater uncertainty and further increase premiums for millions of Americans,” said David Certner, legislative council for the American Association of Retired People. He urged Congress and the Trump administration to “work together on a bipartisan basis to strengthen the ACA.”

Bill Wehrle, Kaiser Permanente’s vice president of health insurance exchanges, said risk adjustment enables the country to move away from a market where plans compete to avoid covering sicker people, including those with preexisting health conditions.

While the ACA’s risk adjustment program hasn’t been perfect, he said, “it has essentially been working as intended, and has helped promote market stability over the past five years.”

Reach Dana Tims at [email protected].