Maryland health insurance stakeholders face some questions after the federal Centers for Medicare and Medicaid Services said over the weekend that it would stop collecting and making risk adjustment payments in light of contradictory federal court decisions.
Maryland Insurance Commissioner Al Redmer said at this point there is some uncertainty as to how the decision would affect the ongoing rate-setting process for insurers on Maryland’s individual market.
“We are not sure at this point what, if anything, the carriers are going to want to do about it,” Redmer said. “We’re still evaluating the decision from DC.”
Risk adjustment payments are collected by CMS from some insurers and given to other insurers within state marketplaces based on the amount of risk insurers took on in their pools. The risk considers factors like medical loss ratio, or how much an insurer takes in in premiums compared to medical payments it makes.
A U.S. District Court judge in Arizona invalidated this year the method of calculating the payments based on a state’s average premiums that CMS had used. At the same time, a district court judge in Massachusetts has ruled that the method is fine.
CMS has asked the Arizona court to reconsider its decision but said that it cannot currently collect or disburse the payments because of that decision.
“We were disappointed by the court’s recent ruling,” CMS administrator Seema Verma said in a statement Saturday. “As a result of this litigation, billions of dollars in risk adjustment payments and collections are now on hold. CMS has asked the court to reconsider its ruling, and hopes for a prompt resolution that allows CMS to prevent more adverse impacts on Americans who receive their insurance in the individual and small group markets.”
CMS calculated risk adjustment transfer amounts for 2017 totaled $10.4 billion.
In Maryland, CareFirst BlueCross BlueShield is the primary beneficiary of these payments.
“The Federal Government’s decision to suspend payment transfers under the ACA’s risk adjustment program could have a significant impact on premiums and place an additional burden on people in the community who can least afford it,” said Brian Pieninck, president and CEO of CareFirst, in a statement. “This action creates even more uncertainty at a time when we are working with regulators in Maryland to stabilize the insurance markets for individuals and small-business owners. In spite of this added challenge, we remain committed to working with the state on options to ensure a stable and viable insurance market.”
The payments are also notable because they drove Affordable Care Act co-op Evergreen Health from the marketplace and out of business.
While he is unsure how the decision to stop the payments will affect the rate-setting process right now, Redmer noted that the law still requires these payments to be collected.
He said he was glad that the decision came in July while the rate-setting process is ongoing and not in November or December when consumers would have begun shopping for plans in the individual market. Last year, the federal government halted its payments of subsidies to insurance companies just before the market opened, requiring a last-minute refiling by the insurers.
No matter what happens with the risk adjustment process, Redmer believes the system is flawed and needs to be fixed.
“It’s a reminder that Congress needs to take aside their partisan differences and either fix the Affordable Care Act or kill it and turn it back over to the states,” he said.
This story has been updated to include a statement from CareFirst.