The suspension of these payments is the most recent maneuver by the Trump administration to undercut the health-care law that President Donald Trump has vowed since his campaign to demolish.
WASHINGTON — The Trump administration took another major swipe at the Affordable Care Act (ACA), halting billions of dollars in annual payments required under the law to even out the cost to insurers whose customers need expensive medical services.
In a rare Saturday afternoon announcement, the Centers for Medicare & Medicaid Services (CMS) said it will stop collecting and paying out money under the ACA’s “risk-adjustment” program, drawing swift protest from the health-insurance industry.
Risk adjustment is one of three methods built into the 2010 health-care law to help insulate insurance companies from the ACA requirement that they accept all customers for the first time — healthy and sick — without charging more to those who need substantial care.
The other two methods were temporary, but risk adjustment is permanent. Federal health officials are required each year to calculate which insurers with relatively low-cost consumers must chip in to a fund, and which ones with more expensive customers are owed money. This idea of pooling risk has had significant practical effects: encouraging insurers to participate in the insurance marketplaces the ACA created for Americans who cannot get affordable health benefits through a job.
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In its announcement, CMS said that it is not going to make $10.4 billion in payments that are due to insurers in the fall for expenses incurred by insurers last year.
CMS, a branch of the Department of Health and Human Services (HHS) that oversees much of the law, is supposed to issue an annual report on the program but has not released a report due late last month.
The suspension of these payments is the most recent maneuver by the Trump administration to undercut the health-care law. A Republican-led Congress last year failed to repeal much of the ACA. The administration has been taking steps to dismantle it through executive powers.
The five-paragraph statement plus a timeline issued Saturday justified the latest maneuver by tying it to a legal dispute over the fairness of the risk-adjustment formula.
The dispute goes back about three years to a new type of nonprofit insurer, known as Consumer Oriented and Operated Plans (co-ops), created by the ACA as alternatives to traditional insurance companies. Most of the co-ops found themselves in such fragile financial condition that they closed, and a few that have survived sued the government, alleging they were unfairly making contributions into the risk-adjustment fund while larger, better-established insurers were receiving payments.
In two cases, federal district judges in Massachusetts and New Mexico reached opposite conclusions. The Massachusetts judge found the HHS formula fair, but the one in New Mexico ruled it was “arbitrary and capricious.” Federal health officials are asking that the New Mexico ruling be reconsidered.
Two major insurers’ trade groups decried the move.
“Risk adjustment is a mandatory program under federal law,” said Scott Serota, president of Blue Cross Blue Shield Association. “Without a quick resolution … this action will significantly increase 2019 premiums for millions of individuals and small business owners. … It will undermine Americans’ access to affordable coverage, particularly for those who need medical care the most.”
Matt Eyles, president of America’s Health Insurance Plans, noted in a statement that the timing of this latest move could be particularly disruptive, because this is the season during which insurers nationwide decide whether to take part in ACA marketplaces for 2019 and, if so, what rates to charge. “This decision … will create more market uncertainty and increase premiums for many health plans,” Eyles said.