As if the complexities around healthcare affordability couldn’t get more convoluted, the latest news from the Trump administration to halt approximately $10.4 billion in risk adjustment payments has grave impacts to the healthcare industry.
Risk adjustment, a permanent financial stabilization program, was established as part of the Affordable Care Act (ACA) to transfer payments between health insurers based on the level of risk associated with the members they enrolled. This program alleviates the need to conduct underwriting while enrolling a member and establishes the balanced risk on the backend, allowing members to all pay the same rate regardless of any pre-existing medical conditions. Typically on June 30, the payment receivable or payable is allocated to each Issuer with a qualified health plan (QHP) that is risk adjusted under the ACA. In light of recent litigation out of New Mexico, the Trump administration has reported it will temporarily suspend the payments to Issuers. Although there is much discussion on whether this was an aggressive and needless decision on behalf of the Trump administration, truth be told, this will have an enormous impact to affordability for years to come if it is not remedied without delay.
Some of the Impacts to Issuers, Providers, and Members?
Ability to offer affordable plans in 2019 and beyond – Risk adjustment is the cornerstone of an Issuer’s financial solvency for ACA plans; without it, rates will be increased considerably.
Medical Loss Ratio (MLR) Calculations – Calculations for MLR will be drastically skewed. Issuers are required to submit a report to the Department of Health and Human Services (HHS) each year that shows how much percentage of premium dollars were spent on medical care for their members. If they fail to meet the minimum standard, then Issuers are required to provide a rebate to their members. Additional guidance from the governing bodies is needed to identify how to remedy this issue if the halt draws out longer than just “temporary.”
Risk Share Agreement and Shared Savings – Many Issuers have contracted with physician groups to improve the quality of care and access for members. Any receivables owed to physicians for services offered under such agreements will be on hold until risk adjustment payments are made. This could bring on a substantial amount of network access issues if physicians decide not to participate in these types of agreements going forward due to withheld payments.
The impacts of this decision to halt risk adjustment payments are far and wide. The hope for reconsideration of this decision from the Trump administration is greatly anticipated. Without risk adjustment payments being conducted, the instability of the market will continue, and drastic rate increases for the future are imminent.
For questions about what this ruling means for your organization, please contact me directly at jsmith@gormanhealthgroup.com.
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