A closer look at the CMS decision to suspend risk adjustment payments

A closer look at the CMS decision to suspend risk adjustment payments

Earlier this week, the Trump administration announced it would be suspending more than $10 billion in risk adjustment payments to issuers. Since then, several issuers and analysts have come out against the decision, saying CMS had several other options it could have taken.  

According to the Centers for Medicare & Medicaid Services (CMS), the hold is due to a March court ruling and pending litigation. The case involved New Mexico Connections, a consumer operated and oriented plan (CO-OP), which sued the Department of Health and Human Services (HHS) over an alleged flaw in the calculation that favored larger issuers. The presiding judge, James Browning, ruled that HHS’ formula was not illegal but should be re-examined. A previous court ruling in Massachusetts upheld the federal program.  

CMS owes Issuers on the Affordable Care Act (ACA) marketplace $10.4 billion in risk adjustment payments for 2017, which was supposed to be paid in the fall. “We were disappointed by the court’s recent ruling,” CMS Administrator Seema Verma said in a statement released Saturday. “As a result of this litigation, billions of dollars in risk adjustment payments and collections are now on hold.”  

Due to the conflicting court rulings, several health plan representatives and analysts have come out saying CMS had a choice on whether to immediately act on the ruling or even challenge the ruling – and many believe they chose the wrong route.  

Advocacy and trade association AHIP (America’s Health Insurance Plans) also released a statement urging CMS to re-evaluate its decision. “This decision comes at a critical time when insurance providers are developing premiums for 2019 and states are reviewing rates. 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.”  

The risk-adjustment plan has long divided Issuers. Larger plans with more resources and sophisticated data teams have used the plan to bring in more money for their high-risk patients, while smaller plans have struggled to manage the data and often end up losing out on federal dollars for their higher-cost patients. In this case, though, even smaller Issuers are calling this decision an eleventh-hour, arbitrary whiplash for the exchanges. Analysts also worry the move signals a shift away from the ACA’s core tenant of guaranteed issue, as it threatens a financial toll on issuers with older, sicker members.  

Analysts say this decision will be especially hard on the Blue Cross Blue Shield Association, which is the last major player in several individual markets. BCBS was one of the first to release a statement praising the program’s current design and urging CMS to reconsider. “This action will significantly increase 2019 premiums for millions of individuals and small business owners and could result in fewer health plan choices,” the group’s CEO Scott Serota said in the statement. “It will undermine Americans’ access to affordable coverage, particularly those who need medical care the most.”  

Back in January, President Donald Trump halted the cost-sharing reduction payments that issuers are mandated by law to pay out on behalf of their enrollees. In response, most states required issuers to load the cost of those payments into benchmark silver plans to increase subsidies and keep low-income individuals covered. As a result, subsidized members have seen their premiums go down while unsubsidized members face higher premiums.  

Sources:  

  1. https://www.fiercehealthcare.com/payer/blue-shield-california-kaiser-molina-risk-adjustment-cms-centene 
  2. https://www.fiercehealthcare.com/payer/cms-trump-aca-risk-adjustment-suspends-billions-insurers-ahip  
  3. http://www.modernhealthcare.com/article/20180709/NEWS/180709927  
  4. https://www.forbes.com/sites/brucejapsen/2018/07/07/insurers-to-trump-suspending-payments-for-high-need-patients-roils-market/#7cd555001dea 

 The views and opinions expressed by the authors on this blog website and those providing comments are theirs alone, and do not reflect the opinions of Softheon. Please direct any questions or comments to marketing@softheon.com.

Jen Eyring

Jen Eyring is the Director of Marketing at Softheon. Prior to this role, she focused on creating instructional documentation for Softheon’s five core solutions and their corresponding operating procedures. She has also acted as a Product Manager for our Foundry solution. Jen holds a BA in Writing, Rhetoric, and Technical Communication from James Madison University.

Leave a Reply

Close Menu