Despite a brief payment freeze last summer, the Affordable Care Act’s risk adjustment program “operated smoothly” last year, according to new data from the Trump administration.
The Centers for Medicare & Medicaid Services issued a report (PDF) on Friday analyzing the performance of the risk adjustment program and found that 572 insurers offering ACA plans participated in the program in 2018, down from 654 in 2017.
Of the participants, 552 received a risk adjustment transfer—excluding high-cost risk pool—and 20 were hit with a charge in at least one pool, according to the report. Across the country last year, the value of risk adjustment transfers was equal to about 6% of premiums, compared to 8% of premiums in 2017.
In total, transfers equaled $10.4 billion last year, with half funds collected by CMS and the other half money disbursed to insurers. Risk adjustment payments are mandated to be budget neutral.
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“The risk adjustment program is working as intended by more evenly spreading the financial risk carried by issuers that enrolled higher-risk individuals in a particular state market risk pool,” CMS wrote in the report, “thereby protecting issuers against adverse selection and supporting them in offering products that serve all types of consumers.”
CMS suspended the payments in early July 2017 as it resolved litigation from New Mexico Health Connections, a consumer operated and oriented plan. The health plan argued that the payments are calculated in a way that favors large payers.
The payments were put on hold following a court ruling that suggested the feds had built inappropriate formulas for risk adjustment calculations based on their belief that these payments must be budget neutral.
Industry groups like America’s Health Insurance Plans warned that the disruption could lead to instability in the markets. However, CMS reinstated the payments later that month in a final rule that did not change the methodology used to calculate the transfers.
The final payment methodology was adopted in December, although the litigation is still ongoing.