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The Trump administration said Saturday it's been forced to freeze critical Obamacare payments due to a federal court decision in New Mexico, potentially causing more instability in the program's fragile markets. To do that, the government collects money from health insurers with enrollees who were healthier and as a result "cost less to insure".
"We are extremely disappointed that the administration has frozen payment transfers under the Affordable Care Act's (ACA) risk adjustment program, which is created to keep costs down for consumers while meeting the medical needs of those requiring significant care", President and CEO Scott Serota said in a statement.
Insurance lobbyists said that they were puzzled and confused as to why the administration suspended the payments at this time. But U.S. District Judge James Browning of New Mexico ruled in February that HHS couldn't use statewide average premiums to come up with its risk-adjustment formula because the agency wrongly assumed the ACA required the program to be budget-neutral.
The main insurance trade associations in Washington have been organizing calls with their member companies and trying to coordinate a response.
"We were disappointed by the court's recent ruling", Seema Verma, administrator for the Centers for Medicare and Medicaid Services (CMS), which administers the program, told The Wall Street Journal in a statement.
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But a bigger concern for now is how long the suspension of payments will last.
But supporters of the ACA criticized the CMS announcement as the latest move by the Trump administration to undermine Obamacare.
The risk adjustment program does not involve taxpayer funds.
The Centers for Medicare and Medicaid Services said it had to put the payments on hold, after a US district court judge ruled the government arrived at the formula that guides the payouts in a flawed way. Companies that end up insuring a large number of people who require ongoing care tend to be less profitable than those insuring mostly healthy people. Last year, the administration halted important subsidies for insurers. Eventually, experts say, some insurers could simply get fed up and exit ObamaCare markets, leading to fewer choices for consumers. "It moves us back to some extent to the status quo where people with pre-existing conditions found it very hard to get insurance".
If an insurer does not have the financial cushion to deal with losing the payments, "some insurers may say this is not a risk that we're willing to take and walk away", he said.
"We want to make sure that we keep our insurers in the market", he said.