CMS late on Tuesday reinstated the Affordable Care Act risk-adjustment program and updated its methodology, a little more than two weeks after freezing more than $10 billion in payments to insurers.
The final rule will not go through a notice and comment period, as CMS said immediate action "is imperative to maintain stability and predictability in the individual and small group health insurance markets." The agency also said it will issue a notice of proposed rulemaking to seek feedback on the risk adjustment methodology for the 2018 benefit year.
CMS Administrator Seema Verma said in a press release the rule will mitigate some of the uncertainty caused by a New Mexico court decision that found flaws in the risk-adjustment program's transfer formula. “Issuers that had expressed concerns about having to withdraw from markets or becoming insolvent should be assured by our actions today," she said. "Alleviating concerns in the market helps to protect consumer choices.”
The rule was not unexpected, as last week the Office of Management and Budget posted on its website it was in the process of approving a potential reinstatement of the payments.
In February, the U.S. District Court of New Mexico ruled the risk-adjustment program was flawed and that HHS did not adequately explain the methodology to participating insurers. CMS said Justice James Browning’s ruling prevented it from collecting or making payments until the formula was changed, effectively grinding redistribution to a halt.
A June 21 hearing reconsidering the ruling made evident that the case would not be concluded in time for CMS to make scheduled risk-adjustment payments in August, the agency said.
HHS sets the risk adjustment methodology in advance of each benefit year, allowing insurers to rely on the guidelines when pricing their plans. So when the Trump administration froze the $10.4 billion in payments earlier this month, insurers owed money were not pleased. Many in the industry expected premiums to skyrocket and more insurers to exit the ACA’s individual marketplaces.
Blue Cross Blue Shield Association CEO Scott Serota called the freeze a recipe for “turmoil” and predicted it would “undermine Americans’ access to affordable coverage.”
Smaller insurers Molina and Centene, however, were granted a brief respite. Now both companies, each of which owes $1 billion in 2017 risk-adjusted payments, will once again have to pay up.