CMS's Final Rule on Risk Adjustment May Raise More Uncertainty

From Health Plan Weekly

Industry experts largely applaud CMS's issuance of a final rule July 24 to restart the risk adjustment (RA) payment transfer program under the Affordable Care Act (ACA) after three weeks of uncertainty. Starting in August, as originally scheduled, CMS anticipates facilitating the transfer of $10.4 billion in RA amounts to ACA exchange plans for the 2017 benefit year.

On July 7, CMS officials said a February ruling from a federal court in New Mexico was forcing the agency to suspend the program, which is designed to spread financial risk and protect plans against adverse selection in the ACA's individual and small-group marketplaces.

"Insurers are in the process of deciding about 2019 marketplace participation and finalizing rates, so any further delay in reinstating the payments could have negatively impacted insurance markets going into 2019 Open Enrollment — potentially leading to higher rates and fewer options for consumers," says Ross Weiler, principal at Day Health Strategies. "However, since the suspension has only been in effect for a few weeks and rates have not been finalized, we do not believe it will have much if any impact on how insurers approach 2019."

CMS's final rule adopts RA methodology for the 2017 benefit year, including the use of statewide average premium. The agency said in its final rule that it intends to issue a Notice of Proposed Rulemaking and solicit public comment on the RA methodology that will apply to the 2018 benefit year, which was also vacated by the court.

That, according to Hans Leida, principal and consulting actuary in the Minneapolis office of Milliman, Inc., might raise new challenges for plans. "We want to keep an eye on it since 2018 rates were set a while ago and we’re now midstream," he says.

The hope is that CMS reissues the RA methodology with no changes from when insurers priced 2018 premium rates in the spring/summer of 2017, says Leida.

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