Pause in Risk Adjustment Payments Announced, CMS Blames District Court's Decision

Blaming a recent decision by the US District Court for the District of New Mexico, CMS has announced that it has halted collections or payments under the risk adjustment program, including amounts for the 2017 benefit year, established by the Affordable Care Act (ACA) for the 2014-2018 benefit period.

The risk adjustment program, finalized by CMS in 2013, included the use of a statewide average premium in order to maintain a budget neutral program. The provision resulted in the creation of a “risk pool” by participating health insurers to help balance the costs of insurers who have high-risk enrollees. However, the program has seen constant challenges since its inception, particularly for the individual and small-group insurance marketplace.

According to CMS, the risk adjustment transfer amounts for the 2017 benefit year are $10.4 billion, which includes transfers across catastrophic, small group, and individual noncatastrophic risk pools.

“We were disappointed by the court’s recent ruling. As a result of this litigation, billions of dollars in risk adjustment payments and collections are now on hold. CMS has asked the court to reconsider its ruling, and hopes for a prompt resolution that allows CMS to prevent more adverse impacts on Americans who receive their insurance in the individual and small group markets,” CMS Administrator Seema Verma said in a statement.

Reacting to the decision, America’s Health Insurance Plans (AHIP), which represents a significant portion of the US health insurance community (except UnitedHealthcare, Aetna, and Humana), said that the risk adjustment pool helps ensure that patients who have a high need for health services receive their care by sharing the cost of covering them. Plans that cover more low-risk patients transfer their funds to the plans with high-risk patients, minus taxpayer money.

“We are very discouraged by the new market disruption brought about by the decision to freeze risk adjustment payments,” the AHIP statement sais, especially since this is the time of year when 2019 premium rates are being finalized. Explaining the impact of the decision on consumers who buy individual coverage or through small businesses, AHIP said that this could increase uncertainty in the market and could “reduce coverage options.” Additionally, “costs for taxpayers will rise as the federal government spends more on premium subsidies.”

The Blue Cross Blue Shield Association (BCBSA) mirrored AHIP’s concerns of an increase in 2019 premiums and reduced access for individuals and small business owners. Urging CMS to use “all legal avenues available,” BCBSA would like CMS to act quickly to reinstate the 2017 payment transfers “to ensure the market works as intended under the law and that coverage for millions of Americans is not disrupted.”

A timeline of the events leading to this weekend’s decision has been released by CMS.