The Centers for Medicare and Medicaid Services has reestablished the risk adjustment payments it froze earlier this month due to a court case over the program and, as such, will be paying out $10.4 billion to insurers.
In the final rule posted today, CMS has reissued, with additional explanation, the risk adjustment methodology for the 2017 benefit year, allowing the agency to resume the program in the individual and small group markets.
"This rule will restore operation of the risk adjustment program, and mitigate some of the uncertainty caused by the New Mexico litigation," said CMS Administrator Seema Verma. "Issuers that had expressed concerns about having to withdraw from markets or becoming insolvent should be assured by our actions today."
In February, a federal court in New Mexico invalidated the use of the statewide average premium in the risk adjustment formula, remanding the case back to the lower court.
CMS filed for a motion for reconsideration, which was held on June 21. But with a ruling not expected until at least Labor Day, CMS said the issue would not be resolved in time for the agency to make scheduled risk adjustment payments and collections in August.
CMS froze the payments, but today said it has vigorously defended the agency's implementation of the risk adjustment program.
The risk adjustment program was established in Affordable Care Act to provide payments to health insurance issuers that enroll higher-risk populations, such as those with chronic conditions, funded by payments from those that enroll lower-risk populations, thereby reducing incentives for issuers to avoid higher-risk enrollees.
Further, in the final rule, CMS announced its intention to issue a notice of proposed rulemaking to propose and solicit comment on the CMS risk adjustment methodology that will apply to the 2018 benefit year, which was also vacated by the court.
"We commend the administration for taking swift action to issue this final rule, which provides much-needed stability and predictability as insurance providers finalize premiums and participation decisions for 2019," said Matt Eyles, president and CEO of America's Health Insurance Plans. "By quickly resolving the uncertainty regarding risk adjustment transfers, the administration has taken an important step to ensuring more affordable coverage choices are available for all Americans, including high-need patients and those with pre-existing conditions."