Health Care Primer: The Sabotage And Retaliation Edition

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The payments work this way: The government takes money from insurers with healthier, low-risk customers, and gives it to insurers with less-healthy, higher-risk customers.

The trade group America's Health Insurance Plans said in an emailed statement that "We are very discouraged by the new market disruption brought about by the decision to freeze risk adjustment payments". The idea is to insulate insurance companies from the cost of enrolling people with pre-existing conditions, and remove the incentive for insurance companies to cherry pick healthy people.

CMS administrator Seema Verma said in a statement the administration was "disappointed" in the February ruling and that CMS has asked the court to reconsider and "hopes for a prompt resolution that allows CMS to prevent more adverse impacts on Americans".

The announcement came as insurers were awaiting an annual report that usually comes at the end of June, informing them of whether they owe money into the risk adjustment program or will be paid out for the previous year. "And costs for taxpayers will rise as the federal government spends more on premium subsidies", AHIP said in a statement. Small health plans also have far less capital than more established insurers to comfortably make large risk-adjustment payments.

New Mexico Health Connections and Minuteman Health of MA, two small nonprofit insurers, filed lawsuits in 2016, contending that the Obama administration created an inaccurate formula that unfairly rewarded large insurers.

President Barack Obama's signature law, the Affordable Care Act was signed into law in March 2010.

On Feb. 28, 2018, a federal judge in New Mexico decided that the use of the statewide average premium formula to calculate risk adjustment payments was flawed.

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In January this year, the federal district judge in MA upheld the methodology used by the federal government to calculate risk adjustment payments. "It will undermine Americans' access to affordable coverage, particularly for those who need medical care the most".

"As a result of this litigation, billions of dollars in risk adjustment payments and collections are now on hold", she said.

Risk adjustment is a key aspect of market stabilization under the ACA, also known as Obamacare. According to health insurers, this could drive up premium costs and create health care marketplace uncertainty.

CMS was referring to a February ruling from a federal court in New Mexico that invalidated the risk adjustment formula, and a January ruling from a federal court in MA that upheld it.

CMS cites the late February court ruling in deciding to place a freeze on the $10.4 billion which it collected a year ago, and which ordinarily would be dispersed among high-risk insurers. These include eliminating the individual mandate penalty and broadening the availability of two alternatives to Affordable Care Act policies.

These moves are prompting some insurers to request premium hikes for 2019 in the double digits.

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