Published: Tue, July 10, 2018
Health Care | By Cedric Leonard

Trump administration halts billions in insurance payments under Obamacare

Trump administration halts billions in insurance payments under Obamacare

The Trump administration is halting billions of dollars of payments to insurers under the Affordable Care Act's risk-adjustment program, a move that further disrupts the insurance market and could lead to more premium increases next year.

The administration cited a federal court ruling in New Mexico that found that the administration did not properly justify its formula for dispensing the funds. "As a result of this litigation, billions of dollars in risk adjustment payments and collections are now on hold", CMS Administrator Seema Verma said. About 20 million Americans have received health insurance coverage through the program known as Obamacare.

The Wall Street Journal was the first to report the expected suspension of the payments.

At stake is more than $10 billion in "risk adjustment" payments - a feature of the 2010 health law that requires insurers with healthier consumers to reimburse plans that end up with costlier, sicker patients, so the market balances out.

The CMS statement said the agency will "provide additional guidance shortly on how it will handle other issues relating to risk adjustment payments".

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"Costs for taxpayers will rise as the federal government spends more on premium subsidies", the group said. In a statement America's Health Insurance Plans, the trade association for health insurance companies, said they are "very discouraged by the new market disruption brought about by the decision to freeze risk adjustment payments". Many of those are self-employed people and small business owners, generally seen as a Republican constituency. "The executive order the president signed, not long after he got to the White House after the [Inaugural] Parade was effectively, 'We're declaring war on the Affordable Care Act.'" Whitlock says, the goal has been to make the marketplace as inhospitable as possible for participating plans, and this is just one more step in that direction.

The Risk adjustment formula is a key component of Obamacare, allowing for market stabilization. It shuffles money from plans with healthier-than-average members to those with larger numbers of sicker, higher-cost members. In June, the administration said it wouldn't defend central portions of Obamacare in federal court, claiming that key provisions should be invalidated and that the individual mandate is unconstitutional.

"Based on guidance from the Department of Justice, the Department of Health and Human Services has concluded that there is no appropriation for cost-sharing reduction payments to insurance companies under Obamacare". Overall, the momentum has been positive, with numerous major insurers following the broader market's upward momentum.

These moves are prompting some insurers to request premium hikes for 2019 in the double digits.

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