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Trump administration halts billions in insurance payments under Obamacare

11 July 2018

For the past five years, when insurance has been available through ACA marketplaces for people who do not have access to affordable health benefits through a job, federal health officials have started every spring working with navigator groups on plans for the coming enrollment season.

Just as more insurers and consumers were entering the ACA individual market and things seemed to be stabilizing, the Trump administration struck a new blow against the health-care sector over the weekend, cutting off the multi-billion dollar risk adjustment payments that compensate insurers for taking on sicker and more expensive patients.

More: Health care will define the midterms. According to Seeking Alpha, Jefferies, on Monday, called it a near-term negative for Anthem but a short-term positive for Molina and Centene. But U.S. District Judge James Browning of New Mexico ruled in February that HHS couldn't use statewide average premiums to come up with its risk-adjustment formula because the agency wrongly assumed the ACA required the program to be budget-neutral.

The New York Times suggested the payment freeze could "increase uncertainty in the markets and drive up premiums this fall". "And costs for taxpayers will rise as the federal government spends more on premium subsidies".

A federal court in MA upheld the same allocation formula in January.

CMS was referring to a February ruling from a federal court in New Mexico that invalidated the risk adjustment formula, and a January ruling from a federal court in MA that upheld it.

Levitt says the administration's announcement was "a little perplexing", given that the legal fight over the conflicting rulings in New Mexico and MA is still ongoing. Last month the Department of Justice decided not to defend the law in a court challenge in Texas, jeopardizing the part of the law that protects people with pre-existing conditions from being denied coverage, as NPR reported.

Still, insurers are grappling with changes that the Trump administration and Congress have made to Obamacare for 2019. The administration has to have a legal justification for their actions. These include eliminating the individual mandate penalty and broadening the availability of two alternatives to Affordable Care Act policies. However, under Obamacare, insurance companies can not charge higher premiums, or even deny coverage, to clients with pre-existing conditions.

While some may say this means no government money is involved, this ignores the concern expressed in the New Mexico court decision.

The administration's funding for such outreach had already been slashed a year ago to well below the $63 million budgeted annually under former President Obama.

"I think insurers are going to be watching very closely what the administration says in court, and whether this is a sign of further steps to undermine the law, or a good faith effort to try to comply with the judge's order", he says.

Trump administration halts billions in insurance payments under Obamacare