The Trump administration has initiated another action that casts uncertainty over the Affordable Care Act (ACA), commonly known as Obamacare, by freezing risk adjustment payments. This move follows a recent court decision that has questioned the legality of the program’s payment structure.
This decision, announced on Saturday, puts on hold a crucial element of the ACA designed to stabilize the health insurance marketplace. Risk adjustment payments are vital for encouraging insurers to offer plans within the ACA exchanges, particularly by helping them manage the costs associated with covering individuals with pre-existing conditions or those who are otherwise considered high-risk.
The freeze is a direct response to a ruling from a U.S. District Court judge in New Mexico. The court found that the methodology used by the Centers for Medicare and Medicaid Services (CMS) to calculate risk adjustment payments was flawed. The lawsuit argued that the existing formula unfairly benefited larger insurance companies at the expense of smaller ones. With this legal challenge unresolved, the administration has cited the ongoing litigation as the primary reason for halting the payments.
Risk adjustment programs are a cornerstone of the ACA, designed to mitigate the financial risks for insurers participating in the individual and small group markets. These programs function by transferring funds from insurers with healthier, lower-cost enrollees to those with sicker, higher-cost enrollees. This mechanism is intended to level the playing field, ensuring that insurers are not discouraged from covering individuals with significant health needs.
President Trump Discusses Healthcare Policy, raising concerns about Affordable Care Act risk adjustment program.
Insurers rely on these payments to offset the expenses of enrolling a diverse pool of individuals, including those with pre-existing conditions. By freezing these payments, the Trump administration’s action injects significant financial uncertainty into the insurance market.
CMS Administrator Seema Verma issued a statement expressing disappointment with the court’s ruling and its subsequent impact. “We were disappointed by the court’s recent ruling. As a result of this litigation, billions of dollars in risk adjustment payments and collections are now on hold,” Verma stated. She added that CMS has requested the court to reconsider its decision, emphasizing the hope for a swift resolution to “prevent more adverse impacts on Americans who receive their insurance in the individual and small group markets.”
According to CMS, the New Mexico court’s judgment prevents the agency from both collecting and distributing payments using the current methodology, which is based on statewide average premiums. This legal roadblock has triggered the administration’s decision to freeze the program.
Critics of the administration’s move argue that it could have serious repercussions for the stability of the ACA marketplaces. Halting risk adjustment payments could create financial strain for insurers, potentially leading to increased premiums for consumers and some insurers possibly withdrawing from the market altogether.
Andy Slavitt, former acting CMS administrator under President Obama, has been a vocal critic of this decision. Slavitt and others argue that the New Mexico ruling alone does not necessitate a complete freeze of payments. They suggest that the administration’s action is politically motivated, designed to further undermine the ACA. “Politically motivated” disruptions, as Slavitt suggests, would align with President Trump’s long-standing efforts to dismantle the healthcare law.
Since his presidential campaign, Donald Trump has been a consistent critic of the Affordable Care Act. He made repeated promises to “repeal and replace” Obamacare, a rallying cry throughout his campaign and into his presidency. His administration has taken numerous steps to weaken the ACA, including actions aimed at minimizing its “economic burden,” as highlighted in an executive order signed early in his term.
The freeze on risk adjustment payments represents the latest in a series of challenges to the Affordable Care Act. As legal and political battles continue, the future of the ACA and the stability of the individual health insurance market remain uncertain.
