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ACA Funding Frozen by Trump Administration

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Since its inception, the Affordable Care Act (ACA) has been vilified by the GOP. On July 9, 2017, the Trump Administration announced a funding freeze for the risk adjustment program.

This plan was designed to protect insurers from substantial losses. In 2017, the bill for this program totaled $10.4 billion. “The health plans pay into a pool — this doesn’t involve tax dollars — and funds are transferred to insurers that ended up with many high-cost patients,” according to Politico.

The reasoning behind the freeze is the United States District Court for the District of New Mexico ruled against the ACA program on February 28. The court said the formula used to calculate premiums was “arbitrary and capricious.” The method to make these determinations has been in use since 2013 as prescribed under section 1343 of the Patient Protection and Affordable Care Act.

The court desires a further explanation of why the agency runs the ACA’s risk adjustment program using a budget neutral model, which is structuring a financial plan that does not borrow from the U.S. National Budget but uses funding from another source.

CMS reports they appealed the court’s decision and are awaiting the new ruling. Another case was on the same day as New Mexico’s. On July 29, 2016, Minuteman Health, Inc. filed suit at the U.S. District Court in Massachusetts.

The Massachusetts court found in favor of CMS, stating the agency “acted within its authority in promulgating the HHS-operated risk adjustment methodology based on the statewide average premium,” according to the CMS website.

Agency officials are hopeful for New Mexico’s court to reverse its ruling since the findings in Massachusetts favored CMS. Until an announcement is made regarding the appeal’s outcome, all financial transactions for the risk management program must cease due to the earlier ruling.

Insurers who paid into the plan were to receive the annual report for the premiums paid to the plan at the end of June 2018, which details whether an insurer over or underpaid and the difference. Not only do they have to wait for the notice, the CMS will not be able to issue refunds or collect funds until the appeal is finished.

Understandably insurance companies are concerned. Their confidence in the ACA is waning. The trade association for the companies, America’s Health Insurance Plans, announced their disappointment.

Without a quick resolution to the freeze, ACA clientele may find themselves with fewer provider choices. Blue Cross Blue Shield association warns millions of Americans and small business owners will also be subjected to drastically increased premiums in 2019.

Larry Levitt, Senior Vice President at the Kaiser Family Foundation, agreed that the freeze causes uncertainty for insurers and that is one thing companies do not like. When the administration made this move it unquestionably gave the boards of directors reason to question their relationship with the federal government.

Another point Levitt made was this move by President Donald Trump is merely another one of the attempts made to terminate the ACA. The timing was particularly perplexing since the outcomes from New Mexico and Massachusetts case were diametrically opposed.

With the most recent ruling occurring less than four months ago and the appeal hearing taking place 19 days ago, it seems to Levitt that Trump could have waited until the case was resolved. He added:

Normally you would expect an administration to look for ways to minimize the uncertainty and minimize the effect as these cases play out. So it seems like an extreme step to halt this program nationally based on a decision by one district court judge.

Rodney Whitlock, Vice President of Health Policy at ML Strategies disagrees. The tactic is not perplexing. He points out the Executive Order declaring war on the ACA, which Trump signed after the inaugural parade.

In fact, Whitlock adds, freezing the funding was merely the latest strategic move in the battle to undo the Patient Protection and Affordable Care Act. The ultimate goal is to make the marketplace “as inhospitable as possible for participating plans.”

The administration must have legal justification for dismantling the ACA. They have yet to prove their case so the strategy is to tear it apart from within.

By Cathy Milne

Sources:

U.S. Centers for Medicare & Medicaid Services: United States District Court Ruling Puts Risk Adjustment On Hold
NPR: Trump Administration Freezes Payments Required By The Affordable Care Act
POLITICO: Trump administration freezes billions in Obamacare payments, outraging advocates

Featured and Top Image Courtesy of NOBama NoMas’ Flickr Page – Creative Commons License

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