CMS readies potential fix to risk adjustment payments

OMB is reviewing a rule from HHS aimed at "ratification and reissuance" of the risk adjustment methodology. (Sarah Stierch/CC BY 4.0)

The Trump administration is preparing to release a new regulation that could unfreeze $10.4 billion in risk adjustment payments owed to insurers.

The Office of Management and Budget is currently reviewing an interim final rule from the Centers for Medicare & Medicaid Services (CMS) titled “Ratification and Reissuance of the Methodology for the HHS-operated Permanent Risk Adjustment Program under the Patient Protection and Affordable Care Act.”

CMS froze payments earlier this month, citing a New Mexico court decision in February that ruled there was a flaw in the risk adjustment formula that favored larger insurers.

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While it’s still unclear what the rule contains, its designation of “interim final rule” would allow it to take effect as soon as it passes through OMB’s review and is released by the agency.

RELATED: Blues plans crushed by risk adjustment freeze as Kaiser skirts nearly $1B

Katie Keith, principal at Keith Policy Solutions and an adjunct law professor at Georgetown University Law Center, said the rule “definitely seems like a step in the right direction,” although it’s unclear what the substance of the rule is or how long it will take for the White House to review it.

But the title alone suggests the agency is preparing to unfreeze the payments.

“If they wanted to resolve the litigation by clarifying the assumptions in the methodology, this is certainly the way they'd do it,” she said in an email to FierceHealthcare.

A CMS spokesperson said the agency is “reviewing all regulatory and administrative options, as the government continues to litigate this matter in federal court.”

“The OMB display is a standard part of the process for consideration of potential regulatory action,” the spokesperson added.

America's Health Insurance Plans (AHIP) had previously pushed for a "quick resolution" to the freeze to avoid disruption in the individual market.

RELATED: Risk adjustment freeze won’t hurt credit ratings for the largest insurers

Earlier this week, Department of Health and Human Services Deputy Secretary Eric Hargan told the House Ways and Means Subcommittee on Health the agency was forced to freeze the program based on the court’s “nationwide ban on risk adjustment.”

“We are looking at all kinds of potential responses to the court’s decision that obviously vacated our rule,” he said when pressed by Rep. Sandy Levin, D-Mich., as to why HHS hasn’t released an interim rule.

The potential changes to the program come days after dozens of the largest hospital and physician groups denounced the agency’s decision, arguing it would limit access to care and drive up ACA premiums. Several policy experts have said they expect CMS to make the payments come fall.

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