From Health Plan Weekly
In a move swiftly criticized by the health insurance industry,
CMS said on July 7 that it would freeze $10.4 billion worth of collections and
payments under the federal risk adjustment program, citing a February ruling in
a New Mexico court case that challenged how the program calculates those
transfers.
Yet experts say it may be too soon for insurers to panic, as the impact depends on what the administration does and says over the coming weeks.
According to Chris Condeluci, principal of CC Law & Policy, "it is true that [freezing risk adjustment transfers] adds a level of uncertainty that is not desirable." Still, he says he doubts it will impact 2019 premiums, as insurance commissioners aren't likely to allow rate hikes based on those unfunded liabilities.
But Larry Levitt, senior vice president for health reform at the Kaiser Family Foundation, argues that if risk adjustment transfers are halted permanently or if there's a long delay in making them, insurers that were due to receive significant payments will find a way to make up for it.
"Prior-year losses technically can't be made up for in future premiums, but actuaries have all kinds of tricks up their sleeves to shade assumptions more conservatively to try and build a cushion," he says.
The risk adjustment program has long been criticized by some who claim it unfairly punishes small and startup plans.
Martin Hickey, M.D., current CEO of True Health New Mexico, said in a statement, "contrary to what is being said by large insurance companies and their lobbyists who disproportionately benefited from the Risk Adjuster, this federal court decision is GOOD for small and new health insurance companies, and therefore to anyone who purchases health insurance."
According to Condeluci, the only way to fix the risk adjustment formula is to come up with an entirely new one, yet CMS is unlikely to do so.
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