Trump adds more confusion to Obamacare
If you’re been buying insurance through the Affordable Care Act exchanges, here’s more news you need to know. In a surprise weekend announcement, the Trump administration temporarily suspended $10 billion worth of 2017 “risk adjustment payments.” Under the risk adjustment program, the federal government each year collects money from insurers with healthier customers and puts it into a pool that’s used to fund insurers with sicker, higher-cost patients.
To fully understand the administration’s latest move, a little history is in order.
When the ACA was passed in 2010, one of the most important tenets of the law was the rule stating that insurers must accept all patients regardless of their health history. No longer were insurers allowed to deny coverage or charge higher premiums for patients who suffered from costly preexisting conditions.
This provision, called “guarantee issue,” remains one of the most popular among consumers, according to numerous opinion polls. In addition, both President Donald Trump and Senate Majority Leader Mitch McConnell have, in the past, supported the idea that insurers should not consider preexisting conditions when delivering coverage.
But making guaranteed issue work is another story. The reality is sick people do rack up more health care costs. That’s why Obamacare included several provisions to help insurers cover the costs of the sickest patients — among them, the risk adjustment program.
On Saturday, the Centers for Medicare and Medicaid Services (CMS) announced the suspension of risk adjustment payments, saying it was a result of a lawsuit filed by New Mexico Health Connections. The nonprofit insurer sued the government in 2016 claiming the risk adjustment program unfairly penalized smaller insurers. Back in February, a federal judge partially agreed with the insurer and barred the government from making further collections or payments using its current formula.
But in January, in a separate case, a federal district judge in Massachusetts upheld the government formula used to calculate the payments.
Now, months later, CMS has asked the New Mexico judge to reconsider the decision, and in the meantime, it suspended the program. Why the administration waited so long to take action rather than immediately respond to the decision with a justification of its payment formula remains a mystery.
The ambiguity involved in the conflicting New Mexico and Massachusetts rulings may mean the suspension of payments will indeed be temporary. “The administration has said they were disappointed with the New Mexico ruling, and they want to work it out,” said Greg Fann, consulting actuary for Axene Health Partners and fellow of the Society of Actuaries. “There was initial panic after the announcement, but the technical problems can be worked out.”
He added that it’s unclear if the New Mexico ruling — and the suspension — will even apply to 2019 payments or be confined to previous years.
Nonetheless, the timing is problematic. The announcement comes in the midst of the annual rate-filing period when insurers announce their estimated premium prices and plans for coverage to state regulators. About a third of states have filed so far. Initial reports of sky-high premium increases have been offset somewhat by more recent reports of moderate increases, according to data from Kaiser Family Foundation. And the number of insurers planning to offer policies through the Obamacare exchanges has increased.
So the suspension of risk adjustment payments could throw the rate-filing process into chaos, said Cynthia Fox, director of health reform and private insurance at Kaiser Family Foundation. “In general, when there’s uncertainty in the market, insurers will cushion themselves however they can,” she said. “This comes at a time when the market was looking really strong for 2019, and insurers were coming off a very profitable year.”
The cost of any increase in premiums that results from the risk adjustment payments may come from taxpayer dollars. That’s because many ACA customers will qualify for federal government premium subsidies, which are still alive and well in Obamacare. “Costs for taxpayers will rise as the federal government spends more on premium subsidies,” said a statement from America’s Health Insurance Plans, a health insurance industry trade group.
Whatever happens with the risk adjustment payments, it looks as if many exchange consumers will be left to figure out their options for 2019 on their own. That’s because on Tuesday, CMS announced another major cutback to its health insurance counseling program. The counselors, known as navigators, help consumers find an affordable health plan on the ACA exchanges.
Citing inefficiencies and other information options for consumers, CMS cut funding to $10 million — down from $63 million in 2016. In addition, the navigators who remain are being asked to inform consumers about association health plans and short-term health plans, two types of policies the Trump administration has supported as less expensive alternatives to exchange policies.
These plans, however, aren’t required to have the same consumer protections as ACA policies.
The Associated Press contributed to this article.