Nevada’s health insurance exchange was injected with yet another dose of uncertainty over the weekend after the Trump administration announced it was stopping payments to insurance companies required under the Affordable Care Act to even out the burden of providing coverage to the sickest patients.
The Centers for Medicare and Medicaid Services announced on Saturday that it would stop collecting and doling out money to insurers as part of the Affordable Care Act’s risk adjustment program, a mechanism built into the 2010 federal health-care law and designed to reduce the overall risk of accepting all patients onto their insurance plans. The Silver State Health Insurance Exchange is working with the state Division of Insurance to determine how the decision will influence both insurance rates and people’s decision to purchase insurance on the individual market ahead of open enrollment later this year.
Under the risk-adjustment program, federal health officials calculate each year which insurers have healthier, lower-cost patients and must contribute to the risk adjustment program and which ones have sicker, higher-cost patients and should receive sums from out of it. But CMS now says that it will not make $10.4 billion in risk adjustment payments due to insurers this fall for last year’s expenses.
CMS blamed the decision to end the payments on a New Mexico case in which a federal court sided with an insurance co-op against the risk-adjustment formula, though an earlier decision from Massachusetts had upheld the program.
“We were disappointed by the court’s recent ruling. As a result of this litigation, billions of dollars in risk adjustment payments and collections are now on hold,” CMS Administrator Seema Verma said in a statement Saturday. “CMS has asked the court to reconsider its ruling, and hopes for a prompt resolution that allows CMS to prevent more adverse impacts on Americans who receive their insurance in the individual and small group markets."
Both Silver State Health Insurance Exchange Executive Director Heather Korbulic and Insurance Commissioner Barbara Richardson said that it’s too early to tell how significant of an impact the decision will have on Nevada. But Korbulic said that CMS acknowledged the impact of the announcement on a call she participated in on Monday.
“The conversation that I had with CMS today was enlightening in that they recognized that this was very disruptive,” Korbulic said. “They said that they don’t want this disruption, and they’re working on legal and regulatory remedies for a speedy resolution.”
Experts, too, criticized the move over the weekend as unnecessarily disruptive. Andy Slavitt, who served as CMS administrator during the Obama administration, called the announcement “aggressive and needless sabotage” in a tweet over the weekend and urged insurers not to “withdraw or over-react.”
It’s an additional dose of instability injected into exchanges across the country that responded to the end of cost-sharing reduction payments last October, saw a repeal of the individual mandate in December and face ongoing threats from the expansion of association health plans and short-term limited duration plans. Nevada’s exchange also briefly faced the threat of having 14 counties go without any health insurance options available to them on the exchange after several carriers pulled out of the market.
Korbulic said that CMS has communicated its intention of bringing some resolution to the issue by Labor Day. But health insurance rates in Nevada are scheduled to come out on July 17, which means that the state may need to later adjust rates depending on when CMS decides to take action and what that action is.
Richardson, in a statement, said the Division of Insurance is “working diligently” to understand what kind of an impact the decision will have on Nevada’s health insurance market.
“Although at this time it is too early to make any determinations, the Division is reviewing all the available information and will be working with carriers this week,” Richardson said.
Korbulic, however, reiterated that anyone who qualifies for federal subsidies on the exchange would be largely shielded from any potential rate increases, as they were last year when the administration ended cost-sharing reduction payments. That’s because any increase in rates will result in a corresponding increase to the tax credits consumers who make up to 400 percent of the federal poverty level — about $98,400 for a family of four in 2017 — receive.
Some, including financial analysts, expect that the Trump administration will eventually restore the payments. An analysis from Wells Fargo Securities projected that Centene, one of the two insurance companies that offers plans on the Nevada exchange, would in the end be generally no worse off than it was previously projected to be and that UnitedHealthcare, the other insurer, would see a more minor impact.
Of the $10.4 billion in payments and collections for 2017, Centene paid in $607.4 million to the pot while UnitedHealth was due $163.8 million out of it, according to the Wells Fargo analysis.
Neither UnitedHealthcare nor Centene responded to questions from the Independent on Monday about the announcement. However, the national trade association representing insurance plans said in a statement on Saturday said that insurance companies are “very discouraged” by what it described as “new market disruption” and noted the announcement comes as insurance companies are proposing rates and states are reviewing them for the 2019 plan year.
“This decision will have serious consequences for millions of consumers who get their coverage through small businesses or buy coverage on their own,” America’s Health Insurance Plans said in a statement. “It will create more market uncertainty and increase premiums for many health plans – putting a heavier burden on small businesses and consumers, and reducing coverage options. And costs for taxpayers will rise as the federal government spends more on premium subsidies.”
Korbulic said that she hadn’t spoken with the two insurance carriers on Monday, but that the exchange is hopeful that they won’t decide to leave Nevada’s marketplace as a result of the weekend announcement. She also stressed that the “sky isn’t falling” as a result of the weekend announcement from CMS.
“We will find resolutions and solutions here. It’s just another hurdle in what’s been a very long race along the track full of hurdles,” Korbulic said. “Every stakeholder involved in the insurance market across the country is worn out and we need stability and this doesn’t help.”