CMS proposes rule to address risk adjustment program for the 2018 benefit year

The Centers for Medicare and Medicaid Services (CMS) has issued a proposed rule that would adopt the risk adjustment methodology that the Department of Health and Human Services (HHS) previously established for the 2018 benefit year which uses the statewide average premium in the payment transfer formula. The risk adjustment program, required under Sec. 1343 of the Patient Protection and Affordable Care Act (ACA), was designed to stabilize the health insurance markets. CMS seeks comments on the proposed regulations.

Background. On February 28, 2018, the U.S. District Court for the District of New Mexico invalidated CMS’ use of the statewide average premium in the risk adjustment transfer formula established under the ACA for the 2014-2018 benefit years. New Mexico Health Connections, the plaintiff in the case, claimed the risk adjustment formula used by CMS was biased in favor of large, established insurers and discriminated against smaller insurers, like itself. The district court found that CMS had not adequately explained its decision to adopt a methodology that used the statewide average premium as the cost-scaling factor to ensure that amounts collected from issuers equal payments made to issuers for the applicable benefit year, that is, a methodology that maintains the budget neutrality of the program for the applicable benefit year.

The court’s ruling barred CMS from collecting or making payments under the current methodology, which uses the statewide average premium. In light of the court’s ruling, CMS announced that it would suspend the risk adjustment program. In addition, CMS’ Center for Consumer Information & Insurance Oversight (CCIIO) issued guidance to address the implications of the court ruling.

In July 2018, CMS issued a final rule which adopted the risk adjustment methodology that CMS formerly established for transfers related to the 2017 benefit year, so that HHS could continue operation of the program to maintain stability and predictability in the individual and small group health insurance markets. However, the rule only allows for the program to continue for the 2017 benefit year.

Proposed rule. The proposed rule would allow the program to continue for the 2018 benefit year. It explains the justification for utilizing statewide average premium in the calculation of risk adjustment transfers, and expands on the reasoning behind operating the HHS-operated risk adjustment program in a budget-neutral manner. CMS seeks comments on the proposal to use statewide average premium in the risk adjustment methodology for the 2018 benefit year.

“Today’s proposed rule continues our effort to help stabilize the individual and small group markets,” said CMS Administrator Seema Verma. “Our goal has been, and will continue to be, to stabilize the market and provide American consumers with more affordable health coverage options.”

Comments. Comments on the proposed rule should be submitted by September 7. In commenting, refer to CMS-9919-P. Comments may be submitted through the portal at http://www.regulations.gov; or by mail to: Centers for Medicare & Medicaid Services; Department of Health and Human Services; Attention: CMS-9919-P; P.O. Box 8016; Baltimore, MD 21244-8016.

SOURCE: 83 FR 39644, August 10, 2018.
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