CMS reverses course, will make risk adjustment payments to insurers

Maryland Insurance Commissioner Al Redmer. (File)

A federal agency has reversed its decision earlier this month to stop collecting and making risk adjustment payments to health insurers, announcing it would reinstate the payments.

The Centers for Medicaid and Medicare Services had said they would top making the payments in light of contradictory federal court rulings about the risk adjustment program, a key component of the Affordable Care Act.

The risk adjustment program rewards insurers participating in the individual market who take on riskier populations who are likely to require the insurer to pay more in claims.

In Maryland, CareFirst BlueCross BlueShield is the beneficiary of the program at the expense of Kaiser Permanente.

But despite the potential effects in Maryland, no one had yet taken any actions to deal with the repercussions of CMS’ initially decision to halt the payments.

CareFirst said it was concerned about that decision but remained committed to remaining in the Maryland market.

Maryland Insurance Commissioner Al Redmer said the original decision was unlikely to change anything for the 2019 rate-setting process and that Tuesday’s reversal was “no harm, no foul.”

“We think it’s good news,” he said. “It adds a little certainty back in the market, not that there was that much uncertainty created with the prior exercise. We’re glad the administration got it settled.”

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.

Last year, CMS calculated that it made about $10 billion in risk adjustment payments.

“This rule will restore operation of the risk adjustment program, and mitigate some of the uncertainty caused by the New Mexico litigation,” Seema Verma, the CMS administrator, said in a statement.  “Issuers that had expressed concerns about having to withdraw from markets or becoming insolvent should be assured by our actions today. Alleviating concerns in the market helps to protect consumer choices.”

A U.S. District Court judge in Arizona this year invalidated 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 ruled that the method is fine.

In wake of the conflicting decisions CMS decided to stop making the payments. But concern from stakeholders, including lawmakers and insurers, appears to have prompted the agency to reverse course.

The agency decided to reinstate the payments when it became apparent that the ongoing legal action would extend beyond August, when the payments and collections are scheduled.