On July 7, CMS suspended risk-adjustment payments meant to stabilize Affordable Care Act exchange plans -- but on Tuesday agency officials reversed their decision, pleading "the stability of the insurance markets."
The payments, authorized by the ACA, are meant to help plans that have higher-than-average actuarial risk with subsidies taken from plans that have lower-than-average actuarial risk in their states. The idea is to make it more attractive for insurers to offer insurance to high-risk beneficiaries. In states that had not elected to establish such a plan themselves, the federal government stepped in and did it for them.
But in February the case of New Mexico Health Connections vs. HHS et alia -- in which the co-op health plan contended the government's payment formula, which used statewide average premiums as a basis for the HHS-operated risk, was flawed and injurious to their business and should be suspended -- was partially decided in favor of the plaintiff in New Mexico District Court. CMS declared "the ruling prevents CMS from making further collections or payments under the risk adjustment program, including amounts for the 2017 benefit year, until the litigation is resolved," and put the payments "on hold," while filing a motion to reconsider with the court.
But on July 24 the agency and HHS issued an interim rule, "Adoption of the Methodology for the HHS-operated Permanent Risk Adjustment Program under the Patient Protection and Affordable Care Act for the 2017 Benefit Year," in which the agency said that "failure to make the [risk-adjustment] payments in a timely manner threatens to undermine the stability of the insurance markets, 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. Accordingly, HHS is issuing this final rule to allow charges to be collected and payments to be made for the 2017 benefit year."
HHS also gave notice to New Mexico District Court and renewed its call for reconsideration.
Observers including the New York Times have suggested that Republicans, worried the suspension of payments would look like further Trump Administration sabotage of the popular ACA in an election year, pushed the Trump Administration to reverse itself.