Analysis: CMS stopping risk adjustment payments leaves insurance premiums in limbo, jeopardizes Affordable Care Act

Phil Waters
Phil Waters

The CMS decision to stop further collections or payments under the risk adjustment program leaves many questions about future health coverage and insurance premiums unanswered, experts and medical associations told Healio Family Medicine.

The action was seen by many as putting another nail in the Affordable Care Act’s coffin, which would help the current administration achieve its long sought-after goal of dismantling former President Barack Obama’s signature legislative achievement while raising significant questions for the health care coverage of thousands of patients.

CMS said in a press release it was ceasing payments and collections after a New Mexico district court voided the agency’s use of the statewide average premium in the risk adjustment transfer formula for Affordable Care Act for benefit years 2014 to 2018.

“We were disappointed by the court’s recent ruling,” CMS administrator Seema Verma, MPH, said in the release. “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.”

Victoria Wallace, an associate at the Washington, DC-based law firm Arnold & Porter, said CMS’ decision impacts the medical community in a variety of ways.

“Primary care physicians and internists’ patient populations are generally mixed between low, moderate, and high-risk patient populations,” she said. “The decision will likely have a stronger impact on high-risk patients since those are the patients that the risk adjustment policy was intended to help in the first place. Although high-risk patients may self-select into more frequent primary care visits, primary care physicians presumably have a greater patient mix than, for example, specialists, and may not be as greatly impacted in the short term and long-term.”

There were other avenues CMS could explore rather than stop the payments, Phil Waters, a clinical fellow at the Center for Health Law and Policy Innovation at Harvard Law School said in an interview.

“The court’s decision occurred in February but CMS waited until now to announce its policy at a critical time for insurers. CMS could potentially issue an interim final rule to remedy the procedural deficiencies cited by the court — something CMS must have considered, as it has already addressed these concerns for 2019. By fixing the problems identified by the court, CMS would have grounds to challenge the court’s decision immediately,” he said.

“The administration could also have asked for a stay of the ruling pending appeal of the decision, if it truly wished to maintain the status quo. Alternatively, CMS could simply choose to continue the payments everywhere but New Mexico, where the case was filed, as the court did not issue a nationwide injunction,” Waters continued.

He added that CMS’ decision to dig in its heels and not pursue these options puts the status of, and cost of, insurance coverage of an untold number of Americans at risk.

“This decision arrives just as insurers are making crucial decisions about whether they will participate in the Affordable Care Act’s Marketplaces and their premium rates,” he said.

“Physicians may see effects as early as 2019 if their patients are forced to switch plans and provider networks, or potentially drop coverage altogether. If this decision causes premiums to increase further than already expected, some patients, particularly those without access to the Affordable Care Act’s subsidies, may end up priced out of the marketplace,” he said.

Wallace provided another possible consequence of CMS’ action.

“Plans may also begin implementing more utilization management tools (i.e., prior authorization, step therapy) to ensure medical necessity for higher cost items and services,” she said.

The CMS action appears to be another attempt to eliminate the Affordable Care Act. Since President Donald J. Trump was inaugurated in January 2017, the administration has issued a new insurance rule that weakens patient protections. In addition, the President signed a tax bill that narrowly passed the Republican-controlled House and Senate that eliminated the Affordable Care Act’s individual mandate.

Further, a lawsuit against the United States government, HHS, IRS and several others argues that Congressional action to lower the tax on those who did not comply with the individual mandate to buy insurance voids the Affordable Care Act. The case is awaiting action in a U.S. district court based in Texas and could void or negate much of the law. An attempt to completely repeal the Affordable Care Act narrowly failed in the Senate last year, and CNN has previously reported that the Trump administration cut the advertising budget for the Affordable Care Act by 90%.

Waters agreed that the CMS action removes another piece from the Affordable Care Act puzzle, and clouds its future.

“This decision adds to the pattern of uncertainty that has been present since the current administration took office. The Affordable Care Act has been consistently undermined by design, and this only contributes to the growing hurdles the law has to continually overcome. It is entirely possible that this was a deliberate move to continue the pattern of uncertainty and intentional undermining of the Affordable Care Act by the administration,” he said.

AAFP, ACP concerned

The American Academy of Family Physicians and American College of Physicians were among the medical societies expressing “concern” over CMS’ action.

“These [risk adjustment] payments are funded by contributions from insurance plans and not from taxpayer dollars. The funds help protect patients by allowing insurers to compete without cherry-picking healthy consumers over those with chronic illnesses and pre-existing conditions,” the organizations said in a statement, which was also issued simultaneously by the AAP, American College of Obstetricians and Gynecologists, American Osteopathic Association, and American Psychiatric Association.

“This decision contradicts the administration’s pledge to provide individuals and families with more options to secure affordable health care coverage,” the statement continued.

“Stabilizing our health care system and lowering the overall cost of health care is part of our mission, and should remain the focus of the administration in addressing health care.

We strongly urge the [CMS] to reverse its decision to halt the risk adjustment payments, and to instead pursue innovative policy solutions that improve affordability for all individuals,” the societies’ statement concluded.

The American Health Insurance Plans, a national trade association representing 1,300 health insurance companies that provide health care coverage to more than 200 million patients in the United States, also said the timing of CMS’ action is unfortunate.

“We are very discouraged by the new market disruption brought about by the decision to freeze risk adjustment payments,” the organization said in a statement. “It will create more market uncertainty and increase premiums for many health plans — putting a heavier burden on small businesses and consumers and reducing coverage options. Costs for taxpayers will rise as the federal government spends more on premium subsidies.”

Next steps

Waters said that the judge in this case has previously indicated CMS’ motion will be denied; a final decision could come by summer’s end.

For its part, CMS has said additional guidance is forthcoming “shortly” on how the agency will handle other risk adjustment payment concerns, including appeals of risk adjustment amounts from 2017, EDGE server data collection operations, and how issuers should treat risk adjustment amounts in the calculation of medical loss ratios. – by Janel Miller 

Disclosure: Waters reports no relevant financial disclosures. Healio Family Medicine was unable to determine the other contributors’ relevant financial disclosures prior to publication.

Phil Waters
Phil Waters

The CMS decision to stop further collections or payments under the risk adjustment program leaves many questions about future health coverage and insurance premiums unanswered, experts and medical associations told Healio Family Medicine.

The action was seen by many as putting another nail in the Affordable Care Act’s coffin, which would help the current administration achieve its long sought-after goal of dismantling former President Barack Obama’s signature legislative achievement while raising significant questions for the health care coverage of thousands of patients.

CMS said in a press release it was ceasing payments and collections after a New Mexico district court voided the agency’s use of the statewide average premium in the risk adjustment transfer formula for Affordable Care Act for benefit years 2014 to 2018.

“We were disappointed by the court’s recent ruling,” CMS administrator Seema Verma, MPH, said in the release. “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.”

Victoria Wallace, an associate at the Washington, DC-based law firm Arnold & Porter, said CMS’ decision impacts the medical community in a variety of ways.

“Primary care physicians and internists’ patient populations are generally mixed between low, moderate, and high-risk patient populations,” she said. “The decision will likely have a stronger impact on high-risk patients since those are the patients that the risk adjustment policy was intended to help in the first place. Although high-risk patients may self-select into more frequent primary care visits, primary care physicians presumably have a greater patient mix than, for example, specialists, and may not be as greatly impacted in the short term and long-term.”

There were other avenues CMS could explore rather than stop the payments, Phil Waters, a clinical fellow at the Center for Health Law and Policy Innovation at Harvard Law School said in an interview.

“The court’s decision occurred in February but CMS waited until now to announce its policy at a critical time for insurers. CMS could potentially issue an interim final rule to remedy the procedural deficiencies cited by the court — something CMS must have considered, as it has already addressed these concerns for 2019. By fixing the problems identified by the court, CMS would have grounds to challenge the court’s decision immediately,” he said.

“The administration could also have asked for a stay of the ruling pending appeal of the decision, if it truly wished to maintain the status quo. Alternatively, CMS could simply choose to continue the payments everywhere but New Mexico, where the case was filed, as the court did not issue a nationwide injunction,” Waters continued.

He added that CMS’ decision to dig in its heels and not pursue these options puts the status of, and cost of, insurance coverage of an untold number of Americans at risk.

“This decision arrives just as insurers are making crucial decisions about whether they will participate in the Affordable Care Act’s Marketplaces and their premium rates,” he said.

“Physicians may see effects as early as 2019 if their patients are forced to switch plans and provider networks, or potentially drop coverage altogether. If this decision causes premiums to increase further than already expected, some patients, particularly those without access to the Affordable Care Act’s subsidies, may end up priced out of the marketplace,” he said.

Wallace provided another possible consequence of CMS’ action.

“Plans may also begin implementing more utilization management tools (i.e., prior authorization, step therapy) to ensure medical necessity for higher cost items and services,” she said.

The CMS action appears to be another attempt to eliminate the Affordable Care Act. Since President Donald J. Trump was inaugurated in January 2017, the administration has issued a new insurance rule that weakens patient protections. In addition, the President signed a tax bill that narrowly passed the Republican-controlled House and Senate that eliminated the Affordable Care Act’s individual mandate.

Further, a lawsuit against the United States government, HHS, IRS and several others argues that Congressional action to lower the tax on those who did not comply with the individual mandate to buy insurance voids the Affordable Care Act. The case is awaiting action in a U.S. district court based in Texas and could void or negate much of the law. An attempt to completely repeal the Affordable Care Act narrowly failed in the Senate last year, and CNN has previously reported that the Trump administration cut the advertising budget for the Affordable Care Act by 90%.

Waters agreed that the CMS action removes another piece from the Affordable Care Act puzzle, and clouds its future.

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“This decision adds to the pattern of uncertainty that has been present since the current administration took office. The Affordable Care Act has been consistently undermined by design, and this only contributes to the growing hurdles the law has to continually overcome. It is entirely possible that this was a deliberate move to continue the pattern of uncertainty and intentional undermining of the Affordable Care Act by the administration,” he said.

AAFP, ACP concerned

The American Academy of Family Physicians and American College of Physicians were among the medical societies expressing “concern” over CMS’ action.

“These [risk adjustment] payments are funded by contributions from insurance plans and not from taxpayer dollars. The funds help protect patients by allowing insurers to compete without cherry-picking healthy consumers over those with chronic illnesses and pre-existing conditions,” the organizations said in a statement, which was also issued simultaneously by the AAP, American College of Obstetricians and Gynecologists, American Osteopathic Association, and American Psychiatric Association.

“This decision contradicts the administration’s pledge to provide individuals and families with more options to secure affordable health care coverage,” the statement continued.

“Stabilizing our health care system and lowering the overall cost of health care is part of our mission, and should remain the focus of the administration in addressing health care.

We strongly urge the [CMS] to reverse its decision to halt the risk adjustment payments, and to instead pursue innovative policy solutions that improve affordability for all individuals,” the societies’ statement concluded.

The American Health Insurance Plans, a national trade association representing 1,300 health insurance companies that provide health care coverage to more than 200 million patients in the United States, also said the timing of CMS’ action is unfortunate.

“We are very discouraged by the new market disruption brought about by the decision to freeze risk adjustment payments,” the organization said in a statement. “It will create more market uncertainty and increase premiums for many health plans — putting a heavier burden on small businesses and consumers and reducing coverage options. Costs for taxpayers will rise as the federal government spends more on premium subsidies.”

Next steps

Waters said that the judge in this case has previously indicated CMS’ motion will be denied; a final decision could come by summer’s end.

For its part, CMS has said additional guidance is forthcoming “shortly” on how the agency will handle other risk adjustment payment concerns, including appeals of risk adjustment amounts from 2017, EDGE server data collection operations, and how issuers should treat risk adjustment amounts in the calculation of medical loss ratios. – by Janel Miller 

Disclosure: Waters reports no relevant financial disclosures. Healio Family Medicine was unable to determine the other contributors’ relevant financial disclosures prior to publication.

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