CMS: ACA Permanent Risk Adjustment Program 'working as intended'

In the ‘Affordable Care Act (ACA) – Summary Report on Permanent Risk Adjustments Transfers for the 2017 Benefit Year’ that it just released, the Centers for Medicare & Medicaid Services (CMS) emphasizes that the ACA Permanent Risk Adjustment Program – which provides payments to health insurance issuers that cover higher-cost or higher-risk populations – “functioned smoothly for the 2017 benefit year” and is “working as intended by more evenly spreading the financial risk borne by issuers that enrolled higher-risk individuals.”

CMS also says that it will “not collect or pay” risk adjustment transfers “in light of the current status” of litigation in the U.S. District Court for the District of New Mexico, which “issued a decision invalidating” CMS’ use of the statewide average premium for the 2014-2018 risk adjustment transfer formula. CMS stresses that the ruling “prevents [it] from making further collections or payments under the risk adjustment program, including amounts for the 2017 benefit year, until the litigation is resolved.” And CMS notes that data in the report “is provided for informational purposes,” adding that “these amounts do not constitute specific obligations of federal funds to any particular issuer or plan.”

The CMS report indicates that in 2017, 628 of the 654 issuers participating in the risk adjustment program received a risk adjustment transfer, while 27 were charged a default risk adjustment. The “absolute value” of total risk adjustment transfers for 2017 was estimated to be eight percent of total premiums, which is down from nine percent in 2016. According to CMS, “issuers with relatively high paid claims amounts were more likely to receive risk adjustment payments, while issuers with relatively low paid claims amounts were more likely to be assessed charges.” CMS also reports that the average premiums in the individual non-catastrophic risk pool increased by more than 20 percent.

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