Insurers will be relieved, and markets will avoid a big hit.
The Trump administration says it is restarting a key Affordable Care Act program, a little more than two weeks after announcing its suspension.
At the time, the administration said it was stopping the program, known as “risk adjustment,” in order to comply with a federal court ruling. Critics questioned that explanation, noting that the administration had options that would allow the program to keep operating, and suspected yet another effort by President Donald Trump and his allies to sabotage Obamacare.
Now the administration has gone ahead and used one of the available options. And that’s a big deal, because of the critical role risk adjustment plays in keeping insurance markets stable.
Risk adjustment is basically a set or payments that flow back and forth among insurers ― in this case, among the carriers that sell coverage to small businesses and directly to individuals. Insurers that end up with lots of relatively healthy customers put money into the program, while insurers with relatively sick customers get money out of it.
The idea is to make sure carriers aren’t making extra profits simply by finding ways to attract the healthiest beneficiaries ― say, by constructing doctor networks or pharmacy formularies that patients with cancer, HIV or other serious diseases would try to avoid. The federal government calculates the amounts, collects the contributions and makes the payouts.
Each year, billions of dollars go through the Affordable Care Act’s version of the scheme, with some insurers paying large sums and others receiving them. But some insurers have sued the federal government, arguing that the existing system doesn’t treat them fairly. In one of those cases, a lower level federal judge in New Mexico sided with the plaintiffs and declared the formula invalid, at least until the federal government could explain its rationale. The Trump administration subsequently asked the judge to reconsider his ruling.
Not too many observers paid attention to the court decision until early July, when the Center for Medicare and Medicaid Services (CMS), which administers the risk adjustment program, announced it was halting payments until the courts cleared up the legal ambiguity.