Dear Administrator Verma:
On behalf of the undersigned organizations, we are writing regarding the decision announced on July 7 by
the Centers for Medicare & Medicaid Services (CMS) to suspend billions of dollars in annual payments
to insurers as required under the Affordable Care Act’s (ACA) risk-adjustment program. This action
comes at a particularly sensitive time, when health plans are making decisions about whether to
participate in the individual marketplace and developing premiums for 2019, and states are reviewing
rates. We are very concerned that this move will create further uncertainty in the marketplace, negatively
impacting patients’ access to affordable and comprehensive coverage, and lead to higher premium
increases next year.
The risk adjustment program protects insurers from unanticipated costs in the event that their enrollees
are less healthy, as well as minimizes any incentives for insurers to target healthier individuals only for
enrollment. Of the three premium stabilization programs authorized by the ACA, the risk adjustment
program is the only one that is permanent. Therefore, it is particularly critical that the program remain
operational. It works by transferring funds from plans with healthier enrollees in the individual and small
group markets to plans with less healthy enrollees. CMS’ announcement means that almost $10.4 billion
in risk adjustment transfers for 2017, expected to be paid in the fall of 2018, will not be made until the
litigation is resolved in New Mexico Health Connections v. HHS, a case where the U.S. District Court in
New Mexico invalidated the methodology used to calculate risk adjustment payments based on the
statewide average premium. The Court’s invalidation was based on the need for further explanation by
CMS for operating the risk adjustment program in a budget neutral manner. This ruling is in conflict with
the federal court decision in Massachusetts that upheld the risk adjustment methodology.
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