As health insurers prepare to file their rate requests today for individual plans in Tennessee next year, the Trump administration has thrown a wrench into the current payment method that adjusts payments to insurers to compensate for plans to cover higher risk individuals.
Over the weekend, the Centers for Medicare and Medicaid Services (CMS) decided to freeze more than $10 billion of planned risk adjustment payments to health insurers under the Affordable Care Act, or Obamacare. CMS Administrator Seema Verma said the agency sided with a court decision in New Mexico which ruled that the risk-adjustment formula was illegal even though another court challenge in Massachusetts upheld the federal program.
The Blue Cross and Blue Shield Association, which represents the 36 Blue Cross plans in America including the Chattanooga-based BlueCross plan in Tennessee, said removing risk adjustment payments "will significantly increase 2019 premiums for millions of individuals and small business owners." Even though some insurers might save money by not having to pay the adjustment fees, the uncertainty about the pool of those insured is likely to cause companies to charge more to cover their higher risk.
Tennessee's market had appeared to be stabilizing with two new insurers entering the market next year and BlueCross BlueShield of Tennessee said it expected relatively stable rates next year. But the suspension of the federal payments for insurers who take on riskier consumers could complicate next year's market and boost prices yet again.
Julie Mix McPeak, commissioner of the Tennessee Department of Commerce and Insurance and president of the National Association of Insurance Commissioners, said she hopes the uncertainty about the payments can be resolved quickly to allow regulators and insurers to know the path forward.
"State regulators will be in contact with carriers to determine the potential impact a lengthy suspension of risk adjustment payments could have on solvency and premiums," McPeak said in a statement. "While there are still numerous unknowns, we are hopeful greater certainty can be found, and this issue can be resolved quickly – ideally before the August timeline for the 2017 payments – so there will be no need to adjust rates for 2019. However, only time will tell."
Five health insurers have until the end of business today to file their rate requests for individual plans in 2019 under the Affordable Care Act in Tennessee. State regulators will then have until August to approve the proposed prices, insurance department spokesman Kevin Walters said.
BlueCross in Tennessee lost more than $500 million on its individual plans under Obamacare in the first three years of the program, but the insurer said it earned $117 million last year and expected to be profitable again this year. But those profits could be jeopardized without the risk adjustments.
Scott Serota, president of the Blue Cross nationwide association, said insurers "are extremely disappointed that the administration has frozen payment transfers under the Affordable Care Act's (ACA) risk adjustment program, which is designed to keep costs down for consumers while meeting the medical needs of those requiring significant care.
"Risk adjustment is a Congressionally-mandated program that supports both the individual and small group health insurance markets," he said. "CMS should use all legal avenues available to make the payments on schedule and should do so to protect consumers.
Although small insurance plans and some cooperatives complained that Obamacare risk adjustment skewed in favor of bigger, entrenched players, nearly all insurers condemned the CMS ruling to freeze the risk adjustments.
"My belief here is that CMS is picking and choosing which court ruling to act on," said Sean Creighton, vice president of the Avalere consulting firm, "It is very strange that administration would decide to freeze payment given that there are two opinions in different courts."
The Associated Press and other wire services contributed to this report.
Contact Dave Flessner at email@example.com or at 757-6340.