The Centers for Medicare and Medicaid Services (CMS) is moving ahead with efforts to get the Affordable Care Act risk-adjustment program moving again.
CMS today published a draft emergency patch regulation, for 2018 program operations, in the Federal Register.
A federal court in New Mexico has blocked risk-adjustment program operations, due to concerns about the risk-adjustment methods CMS has established for coverage years 2014 through 2018.
CMS officials say the new draft regulations could affect about $4.8 billion in 2018 ACA risk-adjustment program payments.
Program managers are supposed to try to even out health risk for individual major medical business that generated a total of about $75 billion in premium revenue in 2017.
CMS, an arm of the U.S. Department of Health and Human Services, is already using another set of emergency final regulations to keep the current risk-adjustment procedures in place for 2017, and to collect and pay out risk-adjustment cash for the 2017 plan year.
The new draft regulations would keep the current procedures in place for the 2018 plan year.
The ACA risk-adjustment program is supposed to use cash from issuers of individual and small-group major medical coverage with relatively low-risk enrollees to compensate the individual and small-group issuers that end up with the higher-risk enrollees.
Program managers now use a formula that bases payments partly on statewide average health coverage premiums, rather than an issuer’s own premiums.
What New Mexico Health Connections Says
New Mexico Health Connections, a small, nonprofit health insurer, has argued — with broad support from other smaller, newer health insurers — that the current regulations are unfair to newer insurers, which tend to have less information about their enrollees than more established enrollees, and to insurers with premiums that are lower than the state average.
“The district court reasoned that HHS had not adequately explained its decision to adopt a methodology that used statewide average premum as the cost-scaling factor,” CMS officials write in the official introduction to the draft regulations. “The district court otherwise rejected New Mexico Health Connections’ arguments.”
CMS officials say they have tried to address the court’s concerns by explaining the risk-adjustment methods, without making any other changes in the risk-adjustment regulations already adopted for 2018.
CMS officials say the procedures are the way they are because the ACA risk-adjustment program has to support itself, without contributions from the federal government; because CMS needs to set up a system that encourages issuers to keep premiums down, rather than increasing premiums to increase risk-adjustment payments; and because any formula that included an issuer’s own premiums would have required an extra round of adjustment payment adjustments.
If insurers had to wait until after the end of the plan year to have a good idea of what risk-adjustment bills or payments might look like, that would hurt program predictability, officials say.
“Such predictability is important to serving the risk adjustment program’s goals of premium stabilization and reducing issuer incentives to avoid enrolling higher-risk populations,” officials say. “Additionally, using a plan’s own premium to scale transfers may provide additional incentive for plans with high-risk enrollees to increase premiums in order to receive additional risk-adjustment payments”
A copy of the draft regulations is available here.
CMS lists Krutika Amin, Jaya Ghildiyal and Arianne Patterson as the contact people for the draft regulations.
Comments on the draft regulations are due Sept. 7.
Why This Matters to Agents (Even If You Don’t Sell Health Insurance)
The health of the ACA risk-adjustment program, and the smoothness of any transitions to any major changes in how the individual major medical market works, could be key to insurer’s level of interest in the individual major medical market.
The fate of the program could also be a test of all kinds of private companies’ interest in doing business with the U.S. federal government.
Partly because of differences in how Republicans and Democrats see the Affordable Care Act, health insurers have had difficulties persuading the federal government to live up to what the insurers thought were firm agreements on how the ACA risk corridors insurer subsidy program and the ACA cost-sharing reduction policyholder subsidy program would work.
Serious, ongoing problems with the operations of yet another ACA program could raise further doubts in private companies’ minds of the attractiveness of the federal government as a business partner, in areas inside and outside the health program sector.
— Read 5 Reasons the New ACA Risk-Adjustment Storm Could Blow Over, for Agents, on ThinkAdvisor.