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Donald Trump administration decision could force up health care rates

Demonstrators hold signs as Democratic leaders speak with

Demonstrators hold signs as Democratic leaders speak with reporters outside the U.S. Capitol in Washington, D.C., on June 26. Credit: Getty Images/Aaron P. Bernstein

A decision by the Trump administration to suspend payments under an Affordable Care Program meant to ensure health care coverage for sicker people could force up 2019 premiums for individuals and small businesses, regulators and insurers say.

Under the program, called the Risk Adjustment Program, insurers with healthier customers make payments that go to carriers who insure more sick or risky customers, with no cost to taxpayers. The aim is to discourage carriers from only seeking out young and healthy customers.

The suspension followed a February decision in a New Mexico U.S. District Court that a formula used to determine the transfer payments needed further justification. The Centers for Medicare and Mediaid Services, which helps implement ACA programs, has asked the court to reconsider in light of another court decision in Massachusetts that upheld the formula.

Some experts questioned CMS’s decision to suspend the program nationally, given the Massachusetts decision. But CMS said the New Mexico ruling prevented it from making further collections or payments until the litigation was resolved.

Insurers were expecting transfer payments of about $10.4 billion this fall for their 2017 coverage year. And many say they’re uncertain about prospects for future payments as they finalize their offerings for the next open enrollment period that begins in November.

“We were disappointed by the court’s recent ruling,” CMS administrator Seema Verma said n a statement. “CMS has asked the court to reconsider its ruling, and hopes for a prompt resolution that allows CMS to prevent more adverse impacts on Americans who receive their insurance in the individual and small group markets.”

The suspension was announced on July 7, and groups representing the insurance industry reacted quickly.

“Without a quick resolution to this matter, this action will significantly increase 2019 premiums for millions of individuals and small business owners and could result in far fewer health plan choices,” Scott Serota, president and CEO of the Blue Cross Blue Shield Association, said in a statement . “It will undermine Americans’ access to affordable coverage, particularly for those who need medical care the most.”

Rates already were expected to rise because of the recent repeal of the ACA’s individual mandate. The mandate was intended to help rein in premium increases by imposing a tax penalty on those who didn’t buy insurance.

Due to the repeal, which takes effect in January, insurers are asking state regulators for permission to charge higher premium rates for 2019 because they expect younger, healthier people to opt not to buy insurance.

Increased premiums would affect individuals who earn too much to receive subsidies and tax credits under the ACA, and, as rates rise, more unsubsidized policyholders are dropping coverage.

After the federal government suspended the risk adjustment program, Gov. Andrew M. Cuomo directed the state Department of Financial Services, which sets insurer rate increases in New York, to “prepare to implement an expanded State Risk Adjustment Program,” in case the federal program is not reinstated.

The program’s suspension “is the Trump Administration’s latest attempt to do administratively what they couldn’t do legislatively: dismantle the Affordable Care Act,” Cuomo charged in a statement Monday. “We will take action against this regressive policy and protect our health care from the federal government’s attacks.”

The new uncertainties come as analysts see growing strength in ACA markets. More insurance carriers are enteringr new markets and, so far this year, none have withdrawn, according to Katherine Hempstead, a senior advisor at the Robert Wood Johnson Foundation, a Princeton, N.J. -based philantrophy that focuses on health care issues. The foundation provides a web tool to track insurers entering and exiting marketing areas across the nation.

“I would say that the carriers have learned how to serve the market better,” Hempstead said. “Many underpriced \[their policies\] in the beginning and lost a lot of money. Carriers are noticing that the companies in the market are doing a lot better now ... The economic experience has improved and that’s why people want to get in on it.”

Hempstead said she hoped for a speedy resumption of the risk adjustment program, which, she said, allows companies to offer competitive rates no matter who their customers are.

“If you freeze risk adjustment payments you create winners and losers in the short run but in the long run you need risk adjustment or everyone loses,” she said. “I really don’t think you can have a competitive market if you don’t have risk adjustment. It prevents cherry picking and levels the playing field.”

America’s Health Insurance Plans (AHIP), a national trade group representing insurers said in a statement that its was “very discouraged by the new market disruption” brought about by the suspension. “This decision comes at a critical time, when insurance providers are developing premiums for 2019 and states are reviewing rates.”

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