Court Rules on Last ACA Risk Management Program

A three-judge panel at the 10th U.S. Circuit Court of Appeals has sided with the federal government in a dispute over how the government has administered the Affordable Care Act risk-adjustment program.

The 10th Circuit panel has thrown out a district court summary judgment in favor of New Mexico Health Connections, an Albuquerque, New Mexico-based insurer that opposed the government’s risk-adjustment formula.

The district court had ruled that the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare and Medicaid Services (CMS), an HHS agency, had acted in an arbitrary and capricious way when they developed the formula.

The 10th Circuit panel reversed the summary judgment ruling and told the district court to take another look at the case.

Resources

• A copy of the 10th Circuit opinion is available here.
• An earlier article about the New Mexico Health Connections suit is available here.
• An earlier article about the ACA risk-adjustment battle is available here.

The district court had argued that HHS and CMS had not adequately explained why they had adopted the formula they had adopted.

The 10th Circuit panel said HHS had provided an adequate explanation of why it was using the formula.

It’s possible that the district court could still end up ruling in favor of New Mexico Health Connections on other grounds.

An ACA Risk-Management Program Primer

Health insurers in many states once held rates down by refusing to cover people with health problems, such as diabetes or obesity, and by charging higher premiums for enrollees with health problems.

The drafters of the ACA tried to get rid of medical underwriting by developing many mechanisms to push and pull young, healthy people into paying for major medical insurance, even when they felt healthy.

The drafters also created three programs to help insurers that ended up with more older, sicker insureds than other carriers did.

A temporary ACA reinsurance program used a broad tax imposed on almost all carriers to help issuers of individual major medical insurance who ended up covering insureds with catastrophic claims. That program was popular with carriers, but it lasted only three years. Some states have found ways to replace that reinsurance program with state-run reinsurance programs of their own.

A temporary ACA risk corridors program was supposed to use cash from thriving ACA exchange plan issuers to help struggling issuers. Thriving issuers failed to pay in much cash. Insurers and HHS are still fighting over risk corridors program payments in the federal courts.