A federal government decision to freeze "risk adjustment" payments under the federal Affordable Care Act is threatening more than $70 million in funding expected by Minnesota health insurers while also raising questions about the potential impact on premiums next year.
On Saturday, the federal Centers for Medicare and Medicaid Services (CMS) said a court decision earlier this year means it must put on hold the financial transfers, which effectively shift money from some insurers in certain markets to carriers that cover more people with expensive health conditions.
Health policy experts argue the federal agency could have responded to the ruling without freezing the transfers. Insurers, in turn, criticized the move, saying it could result in higher rates for consumers.
"It's ridiculous," said Jim Schowalter, chief executive of the Minnesota Council of Health Plans, a trade group for insurers. "The timing, the impact, the uncertainty continue to make health care harder and more expensive for people than it needs to be."
Risk adjustment is one of three provisions in the Affordable Care Act (ACA) that were designed to promote competition in the insurance markets for individuals and small businesses — two relatively small markets that underwent significant changes with the health law.
In Minnesota, about 150,000 people this year are buying coverage in the individual market, which primarily serves people under age 65 who are self-employed or don't get coverage from an employer. About 310,000 state residents are covered by small employer health plans, which cover 50 people or less.
Risk adjustment has been used for years by the federal government in making payments to private insurers that operate Medicare health plans. The idea is that payments from carriers with relatively healthy enrollees are directed by the government to insurers that happen to attract enrollees who use more medical care.
In a statement Saturday, CMS cited a February decision by the U.S. District Court for New Mexico that invalidated the use of the statewide average premium in the risk adjustment transfer formula established under the ACA, pending further explanation of why the government has been running the program in a budget neutral manner.