A Trump administration move to freeze billions in payments under the Affordable Care Act puts more than $41 million owed to Louisiana’s largest health insurer on hold, creating uncertainty in the market just as rates people will pay in 2019 are being finalized.
The Centers for Medicare and Medicaid Services announced over the weekend it would halt payments under what is called the risk adjustment program, pending a resolution to legal challenges. Some major insurers across the country said the move could lead to higher premiums next year.
Blue Cross and Blue Shield of Louisiana was set to receive $41.4 million in risk adjustment payments from the program, which was designed to prevent insurers from cherry picking healthy patients. The program does that by shifting money collected from insurers with healthier patients to those with sicker patients in the individual and small group markets.
Risk adjustment was one of three main programs under the Affordable Care Act, commonly known as Obamacare, that aimed to stabilize health insurance premiums.
The risk adjustment freeze by CMS raises further questions about the health of the Affordable Care Act’s individual market in Louisiana, where premiums have risen sharply and insurers have fled the market in recent years.
Only two insurers — Blue Cross and Vantage Health Plan — remain in Louisiana’s individual exchange. More than 100,000 Louisianians — most of them low-income, but many others self-employed, independent contractors or people working at small businesses — get insurance through the ACA's individual exchange.
Those who are low-income typically receive subsidies that offset increasing health insurance rates, while the others get hit with the full brunt of higher premiums.
“The risk adjustment program is an important part of making the ACA’s individual marketplace financially stable,” Blue Cross Louisiana spokeswoman Cindy Wakefield said in a statement. “Recent changes to the ACA have been focused on destabilizing the market, when in fact, the market needs more stability. We encourage CMS to reevaluate its decision and resume the risk adjustment program.”
Wakefield added Blue Cross will continue providing plans on the exchange, but said “it is important that we have the ability to forecast and plan for the future in a predictable way.”
Nationally, the Blue Cross and Blue Shield Association said “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.”
Louisiana Commissioner of Insurance Jim Donelon, whose department is currently reviewing the first round of 2019 rates, indicated the halt to the program likely won’t affect next year’s rates here. The financial health of Louisiana’s insurers is good, he added, causing “no concern” about the freeze to the risk adjustment payments.
Vantage Health Plan spokesman Billy Justice said the insurer has already filed small group and individual rates for 2019, and won’t make any changes until it has a better sense for what will happen with the program. Vantage was set to pay $1.2 million under the risk adjustment program, according to CMS figures out this week, meaning it would save money if the program went away.
“We’re going to wait until this thing is finalized,” Justice said. “We still think it’s early. There may still be some adjustments before the end of the year.”
The risk adjustment program applies to individual health plans both on and off the ACA exchange, as well as small group plans. It is funded entirely through shifting money between insurers. In Louisiana, for example, Humana, which offers non-ACA individual and small group plans, was set to pay nearly $39 million into the program last year. Humana didn’t respond to messages seeking comment.
America's Health Insurance Plans, an industry association, estimates the small group market covers 246,122 people in Louisiana, and the individual market — including both ACA and non-ACA plans — covers 233,672.
The move halting the payments is only the latest in a string of changes to the nation’s health insurance system that threatens the individual market, where people who don’t get coverage from their employer or other government programs can buy health insurance.
Last year, the Trump administration ended federal cost-sharing reduction payments to insurers, a move that cost Blue Cross in Louisiana $10 million and drove up premiums for individual plans.
Congress then passed legislation repealing a mandate that individuals carry health insurance or face financial penalties. Repeal of the individual mandate would allow healthy people to forego insurance and leave insurers covering sicker, more expensive customers. That repeal will go into effect next year.
Previously, a federal reinsurance program expired as scheduled under the ACA in hopes states would step in. Donelon unsuccessfully pushed bills at the Louisiana Legislature that would have established a reinsurance program at the state level. He proposed tacking a fee on every covered life in the state to provide a safety net for insurers, which he said would have dropped premiums in the individual market by double digits.
While risk adjustment payments may resume some time in the future, observers say the newfound uncertainty brought on by the decision to halt the payments could further destabilize the individual market.
“Anytime there’s uncertainty in the market, insurers are going to try to price that into their premium,” said Cynthia Cox, director of health reform at Kaiser Family Foundation.
It is not clear if halting the program now means next year’s payments are in doubt, Cox said. But insurers are worried the Trump administration, which has undermined other parts of the ACA, won’t make the payments at all.
Despite double-digit premium increases in certain states’ individual markets, Cox noted most people who get insurance through the exchanges don’t feel the cost of rising premiums. Instead, the federal government picks up the tab through subsidies, a key feature of the ACA that was designed to give lower-income people access to cheaper health care.
In Louisiana, about 85 percent of people on the individual exchange get subsidies.
However, the 15 percent who aren't subsidized feel the full weight of premium hikes. These are people who earn more than 400 percent of the federal poverty level, which is more than $48,240 for an individual and more than $98,400 for a family of four.
After repeated increases to premiums, Blue Cross made $59 million last year in the individual market, a key milestone for the insurer.
Ronnell Nolan, president and CEO of Health Agents for America, said “the jury is still out” on what the risk adjustment freeze means.
However, she warned that the federal programs aimed at stabilizing the individual market are going away, and nothing is being done on the state level to pick up the slack, given the failure of the reinsurance proposal. That means consumers should expect costs to continue to rise.
“Our politicians are insulated from these rates,” Nolan said. “They have no idea how high it is for someone to purchase insurance from the individual exchange if they don’t get subsidies.”