New Mexico Health Connections to appeal portions of risk adjustment ruling regardless of pending decision

Legal and regulatory issues
New Mexico Health Connections will appeal portions of a February risk adjustment ruling. (iStock/BCFC)

A New Mexico judge's decision, slated for the end of this summer, won't put an end to the ongoing legal battle over risk adjustment payments.

New Mexico Health Connections, the insurer that challenged the Department of Health and Human Services’ (HHS) risk adjustment formula, plans to appeal portions of the judge’s February decision, lead attorney Barak Bassman with Pepper Hamilton LLP told FierceHealthcare.

He said the consumer operated and oriented plan (CO-OP) will file its appeal whether or not the district judge upholds his decision to vacate portions of the risk adjustment formula. The Centers for Medicare & Medicaid Services (CMS) has asked the court to reconsider its decision to remand part of the formula that relies on statewide average premiums, but the insurer remains concerned about several other aspects of the program.

New Mexico Health Connections will focus its appeal on alleged "estimation bias" that the insurer claims unfairly penalizes small insurers and cheaper bronze plans. In his February ruling, U.S. District Judge James Browning dismissed claims that the risk adjustment formula is “driving bronze plans out of existence” by underestimating the costs of healthier enrollees.

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“New Mexico Health Connections and others have submitted proposals to fix this bias, but HHS has repeatedly refused to take any action,” Bassman said, adding that the current formula “systematically and materially underestimates the costs of covering enrollees” without a designated chronic condition.

The New Mexico case has taken on broader significance after the Trump administration used it as reasoning to withhold risk adjustment payments to insurers nationwide.

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Browning is considering a request from HHS to reconsider the court’s ruling that the agency’s use of statewide average premiums to calculate risk adjustment payments was arbitrary and capricious. During a hearing on June 21, Browning said he would try to give his opinion “as soon as possible.”

“My goal is to try to have an opinion in your hands before we break for Labor Day weekend,” he said, according to a transcript of the hearing.

For now, Bassman says the court’s ruling provides a chance for federal officials to fix some of the inherent flaws in the formula.

“This gives a real opening to CMS and the industry to really come up with a better solution and a better path going forward that will help consumers and the ACA,” Bassman said. “That’s our end game. We want to make the ACA work better and want a risk adjustment formula that works right.”