CMS suspends $10.4B in risk adjustment payments to insurers

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CMS said it is freezing $10.4 billion in risk corridor payments. (Pictures of Money/CC BY 2.0)

The Trump administration has suspended more than $10 billion in risk adjustment payments to insurers, a move that may drive up premiums and create uncertainty in the individual market.

Citing a March court ruling, the Centers for Medicare & Medicaid Services announced over the weekend that it is placing payments on hold while it resolves the litigation. Insurers on the Affordable Care Act marketplace are owed $10.4 billion in risk adjustment payments for the 2017 benefit year, which were slated to be paid in the fall.

“We were disappointed by the court’s recent ruling,” CMS Administrator Seema Verma said in a statement. “As a result of this litigation, billions of dollars in risk adjustment payments and collections are now on hold.”

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Verma added that CMS has asked the U.S. District Court for the District of New Mexico to reconsider its ruling and that the agency “hopes for a prompt resolution.”

RELATED: New Mexico CO-OP earns favorable ruling in risk-adjustment lawsuit against HHS

The case involves New Mexico Health Connections, a consumer operated and oriented plan (CO-OP), which sued the Department of Health and Human Services (HHS) over what the insurer said was a flaw in the calculation that favored larger insurers. Judge James Browning ruled that HHS’ formula was not illegal but should be re-examined.

A separate ruling in Massachusetts in January found HHS acted within its authority in calculating risk adjustment payments. The program was created under the ACA to prevent insurers from risk selection and avoiding sicker enrollees.

America’s Health Insurance Plans (AHIP) said it was “discouraged by the new market disruption” and urged CMS to “reevaluate its decision.”

“This decision comes at a critical time when insurance providers are developing premiums for 2019 and states are reviewing rates,” AHIP said in a statement. “This decision will have serious consequences for millions of consumers who get their coverage through small businesses or buy coverage on their own. 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. And costs for taxpayers will rise as the federal government spends more on premium subsidies.”