Over the weekend, the Centers for Medicare & Medicaid Services (CMS) issued a statement saying it was halting billions of dollars of payments to insurers under the Affordable Care Act’s risk adjustment program due to conflicting federal court decisions on the program. This move will likely disrupt the insurance market in the Exchanges and could lead to more premium increases next year.
The purpose of the risk adjustment program, a permanent program, is to reduce the incentive for health insurers to select and cover only healthy individuals in the Exchanges. It shifts money from plans with healthier members to those with larger numbers of sicker members to help mitigate high costs of coverage for less healthy individuals.
America’s Health Insurance Plans (AHIP), the association for insurance carriers, expressed concern and stated, “the decision will have serious consequences for millions of consumers who get their coverage through small businesses or buy coverage on their own. It will create more market uncertainty and increase premiums for many health plans—putting a heavier burden on small businesses and consumers, and reducing coverage options. And costs for taxpayers will rise as the federal government spends more on premium subsidies.”
The CMS has asked for additional guidance from the district judge overseeing the case relating to this program, prior to unfreezing the funds.