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CMS Moves to Save Individual Major Medical Insurance

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The administration of President Donald Trump has rushed to save the individual major medical open enrollment period for 2019, by patching the Affordable Care Act risk-adjustment program.

A federal agency, the Centers for Medicare and Medicaid Services (CMS), has developed emergency regulations that could let the ACA risk-adjustment program collect the receivables and pay the payables already in the pipeline for 2017.

CMS has also started to develop formal ACA risk-adjustment patch regulations for 2018.

(Related: 5 Reasons the New ACA Risk-Adjustment Storm Could Blow Over, for Agents)

The regular purchasing season for individual products for 2019 starts Nov 1. Health insurers are racing to complete their 2019 product and rate filings now.

Matt Eyles, the president of America’s Health Insurance Plans, said in a statement that the new CMS regulations could increase the odds that insurers will sell individual coverage in 2019, by providing stability and predictability for the individual market. Eyles praised CMS for working quickly to resolve the uncertainty around risk-adjustment program.

“The administration has taken an important step to ensuring more affordable coverage choices are available for all Americans, including high-need patients and those with pre-existing conditions,” Eyles said.

ACA Risk-Adjustment Program Basics

When Democrats in Congress created the Affordable Care Act, they took away most of the mechanisms health insurers once used to hold down medical claims.

To protect health insurers against the risk that some would end up with much sicker patients than others, ACA drafters included the ACA risk-adjustment program. The program affects the insurers that sell individual and small-group major medical coverage.

The ACA risk-adjustment program is based on a similar program already in use in the Medicare Advantage plan market. The program uses information about patient characteristics to give each patient a health risk score. A plan that ends up with patients with low average risk scores is supposed to send cash to the ACA risk-adjustment program managers at CMS. The program managers are supposed to pay the cash to the plans with high patient risk scores.

(Related: How Sick Is Everyone? A Vast ACA Tracking System Takes Shape)

The insurers that have been getting large amounts of risk-adjustment cash like the program a lot better than the insurers that are paying large amounts of cash into the program.

New insurers without little information about their enrollees’ health, and insurers with unusually low premiums, say the ACA risk-adjustment program rules and formulas are unfair to new insurers with low coverage premiums.

In February, a federal judge in New Mexico agreed with a small insurer there, New Mexico Health Connections, that the effects of the program in the New Mexico market have been unfair. The judge there blocked operation of the program temporarily, and he has indicated  that the case might not be resolved until after Labor Day, according to CMS officials.

CMS Regulations

CMS is taking two separate but related actions to get the ACA risk-adjustment program unstuck.

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CMS is using emergency authority to reissue the risk-adjustment methodology the agency previously developed for the 2017 benefit year, officials said. That should give CMS to continue program operations now, officials said in an announcement released late Tuesday.

A copy of the final regulations for the 2017 benefit year is available here, on the CMS website. CMS says it will be publishing the final regulations in the Federal Register soon.

CMS says it will also develop a “notice of proposed rulemaking,” or set of draft regulations, for 2018, and give the public a chance to comment on the draft regulations for 2018.

CMS officials completed work on the final regulations for 2017 without going through the usual rulemaking process. CMS says it needs to post final regulations for 2017 immediately, without going seeking public comments or going through other ordinary rulemaking procedures, because insurers are expecting to get ACA risk-adjustment program payments for 2017 soon.

“Uncertainty and delay in the distribution of those payments, which issuers anticipated when they set premiums for the 2017 benefit year, could add uncertainty to the market, as issuers are now in the process of determining the extent of their market participation and the rates and terms of plans they will offer for the 2019 benefit year,” officials say in the introduction to the new final regulations.

“CMS has determined that taking immediate action to allow for the continued operation of the risk adjustment program is imperative to maintain stability and predictability in the individual and small group health insurance markets,” officials say. “Quick resolution also helps to preserve the significant investment made by states, issuers, and the federal government to stand up the program.”

Trump Administration Clues

Trump campaigned for repealing and replacing “Obamacare” when he was running for president, but he never defined what he meant by “Obamacare.”

In 2017, the Trump administration let ACA cost-sharing reduction subsidy program payments end, by refusing to continue the Obama administration’s fight against a lawsuit challenging the administration’s authority to make the payments.

The Trump administration recently took a split approach to another federal suit, in Texas: The administration asked the court to let the ACA individual mandate and underwriting rules die, but to leave the rest of the ACA intact.

The administration could have used the New Mexico court ruling as a chance to let the ACA risk-adjustment program fall apart. The end of  the risk-adjustment program might have weakened, or even eliminated, the current ACA-based individual major medical market framework.

Instead, the administration appears to working to keep the individual major medical market intact in 2019.

CMS Administrator Seema Verma said in a statement that CMS wants to mitigate some of the uncertainty caused by the New Mexico litigation.

“Issuers that had expressed concerns about having to withdraw from markets or becoming insolvent should be assured by our actions today,” Verma said. “Alleviating concerns in the market helps to protect consumer choices.”

— Read ACA Risk-Adjustment Death Could Squeeze Some Insurers: Fitchon ThinkAdvisor.

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