CMS finalizes risk adjustment rule for benefit year 2018

“Today’s final rule continues our commitment to provide certainty regarding this important program," said CMS Administrator Seema Verma. (Pixabay/qimono)

The Centers for Medicare & Medicaid Services (CMS) finalized its risk adjustment rule for the 2018 benefit year on Friday, its latest step in a string of legal battles dating back to earlier this year.

The rule calculates the payment amounts using the average premium within a state, rather than the premium for each plan. CMS justified this approach by assuming the program must be budget-neutral based on certain provisions in the Affordable Care Act. 

“Today’s final rule continues our commitment to provide certainty regarding this important program, to give insurers the confidence they need to continue participating in the markets, and, ultimately, to guarantee that consumers have access to better coverage options,” said CMS Administrator Seema Verma in a press release.

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Insurer participation in the ACA marketplace is up, which reflects increased confidence despite ongoing litigation on this topic, she said. 

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Shortly after the rule was proposed, two co-ops—Minuteman Health, which serves Massachusetts and New Hampshire, and New Mexico Health Connections (NMHC)—challenged it in court. The federal district court in Massachusetts upheld the rule, but the one in New Mexico vacated it for being “arbitrary and capricious.” 

CMS challenged that ruling, which kicked off a long, drawn-out series of events, including CMS temporarily freezing $10.4 billion in 2017 payments in June. In August, CMS issued a new version of the rule that justified its methodology in more detail. NMHC remained unsatisfied with this reasoning, but in a response, appeared to concede defeat.  

“HHS…is not helpless. It is capable of responding to this Court’s order by issuing new rules,"  wrote Nancy R. Long, one of the attorneys representing NMHC. "That it has failed to issue those rules properly or in a manner that resolves the deep flaws in risk adjustment is an issue for another day."

In October, the New Mexico judge reaffirmed his ruling that the rule's reasoning was arbitrary. The updated rule adds more context to the decision to use state-based average premiums rather than by individual insurers, as NMHC has argued.

Under the ACA, risk adjustment payments are intended to prevent insurers from turning away higher-risk enrollees. 

NMHC might “rethink this position, but it could be tough for them,” said Katie Keith, a health reform researcher at Georgetown University and principal at Keith Policy Solutions. 

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NMHC itself did not respond to a request for comment, but Keith suspected the co-op feels “pretty frustrated” with the final rule. 

CMS said it declined to adopt public suggestions changing the risk adjustment methodology “because they are outside the scope of this rule.” 

“It’s important that this rule got finalized,” Keith said, and other stakeholders agree. 

“We commend CMS for today’s action confirming the 2018 risk adjustment methodology – an important step to continue to ensure stability and predictability for the individual marketplace,” said Cathryn Donaldson, a spokeswoman for America’s Health Insurance Plans (AHIP), the nation’s largest association of insurance companies. 

Kris Haltmeyer, vice president of legislative and regulatory policy at the Blue Cross Blue Shield Association, similarly said he was “pleased” that CMS issued the rule. Blues plans would have been hit hardest by the 2017 freeze, with several plans owing close to $700 million each.

“The program’s continued smooth operation is vital to ensure access to a broad range of coverage options for millions of individuals and small businesses,” Haltmeyer wrote.

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