News: CMS suspends $10.4 billion in risk adjustment payments

CMS announced on Saturday that all payments to insurers under the risk-adjustment program, including payments for the 2017 benefit year, will be suspended pending the resolution of two contradicting District Court cases. This amounts to $10.4 billion in risk-adjustment payments under the Affordable Care Act (ACA).

The first case involves New Mexico Health Connections, a consumer operated and oriented plan, which sued the Department of Health and Human Services (HHS) over what the insurer said was a flaw in the calculation that favored larger insurers, FierceHealthcare reported.

The judge in the case ruled that HHS couldn’t use statewide average premiums to come up with its risk-adjustment formula because the agency wrongly assumed the ACA required the program to be budget-neutral, according to Modern Healthcare.

The second case was a ruling in Massachusetts that found that HHS acted within its authority in calculating risk-adjustment payments under similar circumstances. The program was created under the ACA to prevent insurers from risk selection and avoiding sicker enrollees, according to FierceHealthcare.

“We were disappointed by the [New Mexico District] court’s ruling. As a result of the litigation, billions of dollars in risk-adjustment payments and collections are now on hold,” said CMS Administrator Seema Verma in the CMS announcement. “CMS has asked the court to reconsider its ruling, and hopes for a prompt resolution that allows CMS to prevent more adverse impacts on Americans who receive their insurance in the individual and small group markets.”

America’s Health Insurance Plans (AHIP) is especially worried about those negative effects on Americans too. “We are very discouraged,” AHIP wrote in a statement. “This decision comes at a critical time when insurance providers are developing premiums for 2019 and states are reviewing rates.”

Ultimately, due to the poor timing, this payment freeze could increase premiums for many health plans, put a heavier burden on small businesses and consumers, and reduce coverage options, according to AHIP. 

Editor’s note: To read the full statement from CMS, click here. To read Modern Healthcare’s coverage of this story, click here. To read FierceHealthcare’s coverage, click here. To read the statement from AHIP, click here. To learn about the various risk adjustment models, click here. To learn how CDI can assist with risk adjustment, click here.