July 13, 2018


In This Issue
Fast Facts
Trump Administration Freezes ACA Risk-Adjustment Funding
Extended Healthcare Happy Hour Examines Legislative and Regulatory Developments
House Committee Advances HSA Reforms and Employer Mandate Delay
President Trump Nominates Brett Kavanaugh to Replace Justice Kennedy on Supreme Court
NAHU Advocates Employer Input on HHS Innovation Initiative
State Spotlight: Sooner or Later, Value-Based Design Is Coming to Oklahoma
CMS Releases Reminders on Broker Use of Personally Identifiable Information
Register Now for the Compliance Corner Webinar on HIPAA Compliance and BAAs
Recess Is Coming: Talk with Your Rep about the Future of Healthcare Reform
HUPAC Roundup
What We’re Reading
E-mail the Editor
Visit the NAHU Website
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Trump Administration Freezes ACA Risk-Adjustment Funding

Last Saturday, CMS announced that it would freeze payments that are part of the ACA’s risk-corridor program. The decision came in response to two separate conflicting federal court rulings on cases filed by healthcare co-ops in 2016 over the use of the statewide premium average as a benchmark in the program. In January, a Massachusetts federal court dismissed a case filed by Minuteman Health Plan but in February a New Mexico federal court ruled in favor of New Mexico Health Connections that the program must be budget neutral. CMS has filed a motion requesting the New Mexico court to reconsider the ruling but, in the interim, CMS will suspend ongoing collections and payments, estimated at $10.4 billion for 2017 for transfers across catastrophic, small-group and individual non-catastrophic risk pools.

The risk-adjustment program is one of the “three-R” programs designed to provide stability during the law’s initial years, alongside the temporary risk corridor and reinsurance programs, which expired at the end of 2016. The risk adjustment program is permanent and pools insurer funds and transfers them to carriers that have medical loss ratios of over 80% and with high claims costs. It is estimated that the individual market will lose roughly $7 billion in risk adjustment payments, while small group plans will lose nearly $2 billion.

The decision to freeze the payments comes roughly nine months after the Trump Administration announced that it would no longer make payments for the ACA’s cost-sharing reduction (CSR) program. The Administration based its decision on guidance from the Department of Justice and HHS that, citing a lack of appropriations, “the government cannot lawfully make the cost-sharing reduction payments.” In May 2016, U.S. District Court Judge Rosemary M. Collyer ruled that, while the program had been properly authorized by Congress, the Obama Administration’s actions to fund the program were unconstitutional because Congress had not appropriated funding.

In response to the Trump Administration’s defunding decision, insurers dramatically increased the costs of plans by an additional 20% or more to offset this additional expense. This is because the subsidies are paid indirectly, as insurers reduce their costs for eligible consumers and in return receive monthly payments from the federal government to make up the difference. However, as insurers have increased the premiums costs, it has subsequently led the federal government to pay more in advanced premium tax credit subsidies (APTCs), resulting in an estimated $20 billion of taxpayer funds required annually over the amount that would have been required had the CSRs been funded.

Taken together, these decisions create additional instability in the marketplaces as insurers set pricing for the 2019 plan year. It is likely to result in a significant increase in premiums for individuals and small businesses, and may lead more insurers to leave the marketplaces altogether to avoid further losses. These decisions are also compounded by the Trump Administration’s decision last month to no longer defend the ACA’s constitutionality with regards to the individual mandate and consumer protections, as well as a federal appeals court ruling last month that the ACA’s risk-corridor payments do not need to be paid out to insurers after legislation enacted in 2014 made the program revenue-neutral. NAHU remains concerned about the administration’s moves to undermine the stability of the marketplaces and urges Congress to pass legislation that would address many of these concerns.

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