Should Risk Adjustment Payments Between Health Insurers be Preserved?

The story

The Trump administration announced over the weekend that it would temporarily halt billions of dollars of payments that help health insurers spread the risk of meeting Affordable Care Act requirements.

Some predict that the move will unleash chaos in insurance markets. Others think the issue will be resolved before any significant damage is done.

Details

At issue are $10.4 billion in “risk adjustment” payments.

Risk adjustment is one of three programs the ACA created to offset the cost to insurers of higher risk patients the law required those insurers to cover. The idea is to spread the risk of covering these patients across the entire insurance market.

Under the risk adjustment program, insurers who on the whole have a lower-risk patient pool make payments to insurers who have more high-risk patients in their coverage.

The Trump administration said it was withholding the payments because of a New Mexico court ruling earlier this year that found fault with the formula the government uses to calculate payments, calling it “arbitrary and capricious.” The finding was based on some newer insurers’ charges that the risk-adjustment program favors established insurers, which have the resources to identify more of their customers’ health risks.

However, another court ruling in Massachusetts upheld the formula, leading some stakeholders to question the abruptness of the administration’s action when the legal matters at play remain unsettled.

The administration said it’s appealing the New Mexico ruling, and “hopes for a prompt resolution.”

Impact

So long as the risk adjustment payments are suspended, most experts agree that it will hit high-cost insurers the hardest. According to ACA data that'd mean several Blue Cross Blue Shield companies, their affiliates, and Anthem, among others.

Timothy Jost, an ACA expert, thinks the matter will be resolved before insurers are affected. Speaking at an event hosted by the American Enterprise Institute – a conservative think tank – Jost explained:

“I think there’s a 100% chance the payout will come when it otherwise would have come in the fall unless the Trump administration decides this is a good way to throw a wrench into the whole thing… There’s no reason why they can’t get this resolved or put out an interim final rule if they have the will to do it.”

That said, Jost characterized the administration’s move as “unnecessary,” predicting that it would “increase premiums and reduce insurer participation” if it continued.

What do you think?

Should risk adjustment payments be restored until the legal questions have been fully settled? Is the Trump administration right to suspend payments now? How does this reflect on your views of the ACA and health insurance in general? Hit Take Action to tell your reps what you think, then share your thoughts below.

—Sara E. Murphy

(Photo Credit: iStock.com / vinnstock)