A federal judge has deemed efforts by the New York State Department of Financial Services (DFS) to change the effects of the Affordable Care Act risk-adjustment program on the state’s health insurers as constitutional, and he dismissed a lawsuit over those efforts that was filed by units of UnitedHealth Group Inc. against the department.
U.S. District Judge John Koeltl of the Southern District of New York earlier this month granted a motion to dismiss the suit against the department, which has been defending a state regulation that seeks to modify the effects of federal ACA risk-adjustment cash transfers payments between health insurers.
Two UnitedHealth units, UnitedHealthCare of New York and Oxford Health Insurance, sued the department over the regulation in October.
The ACA risk-adjustment program requires individual major medical and small-group issuers with enrollees with low risk scores to pay cash into a common fund for each state. Fund managers at the Centers for Medicare and Medicaid Services (CMS), an arm of the U.S. Department of Health and Human Services (HHS), distribute the cash to the issuers in the state that attract enrollees with high risk scores.
The program is supposed to eliminate insurers’ financial incentive to seek out healthier, lower-risk enrollees.
The current risk-adjustment methodology was finalized in 2016.
Maria Vullo, the New York state financial services superintendent, issued an emergency regulation that let her implement a risk-adjustment program in New York if the federal program failed to address the unique needs of the state’s insured residents. The regulation gave Vullo the ability to collect up to 30% of the funds received through the federal risk-adjustment program and redistribute to funds to other insurers based on a methodology developed by the New York department.