Guidance addresses CMS actions related to court’s invalidation of the risk adjustment program

CMS’ Center for Consumer Information & Insurance Oversight (CCIIO) has issued guidance to address the implications of a ruling issued by the U.S District Court for the District of New Mexico’s on February 28, 2018, that prevents CMS from making further collections or payments under the risk adjustment program, including amounts for the 2017 benefit year, until the litigation is resolved. The risk adjustment program was established under §1343 of the Patient Protection and Affordable Care Act (ACA) for the 2014-2018 benefit years.

The litigation. The New Mexico court invalidated CMS’ use of the statewide average premium in the risk adjustment transfer formula for the 2014 — 2018 benefit years pending further explanation of CMS’ reasons for operating the program in a budget neutral manner in those years. The court concluded that the regulations were arbitrary and capricious and the methodology for calculating those charges needed to be revisited. In a similar case, Minuteman Health, Inc. v. HHS, however, the District Court of Massachusetts found that CMS acted within its authority in promulgating the HHS-operated risk adjustment methodology based on the statewide average premium to implement the risk-adjustment program. Based on the contradicting opinion, the government moved the New Mexico district court to reconsider its decision. On June 21, 2018, a hearing was held on CMS’s motion for reconsideration. CMS is currently awaiting the court’s ruling.

Provisions of the guidance. The court’s decision is specific to the HHS-operated risk adjustment methodology for the 2014 through 2018 benefit years; it does not impact program operations related to the 2019 benefit year and beyond. In addition, a state that operates a Health Insurance Exchange is eligible to operate its own risk adjustment program. In light of the current status of the litigation, CMS will take the following steps:

  • Collections and payments. CMS will not collect or pay any specified amounts for the 2017 payment year or collect or pay any specified amounts remaining for the 2014-2016 benefit years at this time.
  • User fees. CMS will collect 2017 benefit year risk adjustment user fees in the August 2018 payment cycle to support program operations as the per member per month basis of the user fee calculation does not use or otherwise rely upon the statewide average premium. CMS is not delaying the administrative appeals process under HHS Reg. §156.1220 for matters related to the 2017 benefit year risk adjustment user fees. Issuers have until August 10, 2018, to request reconsideration of the 2017 benefit year user fee amounts.
  • Edge data. Issuers must continue archiving and maintaining 2014, 2015, 2016, and 2017 EDGE data consistent with normal operations. Additionally, issuers must maintain records required under HHS Reg. §153.620(b). CMS will continue current operations of the 2018 benefit year EDGE server data submission as normal.
  • Discrepancies. While some discrepancy resolutions for the 2017 benefit year have been issued, CMS will cease issuing any further discrepancy resolution decisions at this time.
  • Appeals of transfer amounts. CMS is delaying the administrative appeals process set forth in HHS Reg. §156.1220 for matters related to the calculation of 2017 benefit year transfer amounts (including calculation of risk adjustment default charges) as these amounts were calculated under the HHS-operated risk adjustment methodology that utilizes the statewide average premium.

CMS will provide further guidance regarding the treatment of risk adjustment transfer amounts for Medical Loss Ratio (MLR) Reporting purposes in the near future.

SOURCE: Implications of the Decision by United States District Court for the District of New Mexico on the Risk Adjustment and Related Programs, www.cms.gov, July 12, 2018.
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