2019 Health Insurance Premium Increases Uncertain, as ACA Risk Adjustment Payments Put on Hold

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On July 7, 2018, the Trump Administration announced it would halt ACA risk adjustment payments due to or collectible from health insurers for 2017 benefit periods.  The pause is in response to a February 2018 United States District Court for the District of New Mexico decision which invalidated the risk adjustment payment formula.  CMS is currently seeking reconsideration of the court’s ruling, but, until the litigation is resolved, any further collections or payments under the ACA risk adjustment program are prohibited.

Pursuant to the previous framework and formula, risk adjustment payments were used to transfer funds from insurers who covered low health risk populations than the statewide average to insurers who covered relatively higher health risk populations.  The payments were intended to stabilize premiums and ensure individuals and small groups could secure affordable coverage.

In reaction to the pause and possibility that they will not receive future risk adjustment payments, health insurers have indicated future premiums may be subject to greater volatility.  Conceptually, insurers would now be offering coverage in an environment where low risk populations would have no floor, but where high risk populations would have no ceiling.  This increased spread motivates insurers to account for a higher variance and wider array of outcomes for their health risk management practices and pricing methodologies.  The result, thus, could lead to increased future premiums not only for individuals and small businesses, but could also impact the market for large groups.

If you are responsible for health plan decisions for your organization, you should consider how this pause and potential for future change, will alter your 2019 benefits strategy.  For more information or to create a dialogue on this topic, please contact your Henderson Brothers consultant.

Please note that the information contained in this document is designed to provide authoritative and accurate information, regarding the subject matter covered. However, it is not provided as legal or tax advice and no representation is made as to the sufficiency for your specific company’s needs. This document should be reviewed by your legal counsel or tax consultant before use.