Democrats are seizing on the Trump’s administration’s decision to pause payments to Obamacare insurers, arguing that the uncertainty is going to lead to a further spike in rates just before this November’s midterm elections.
While there’s time for the issue to be resolved before insurers have to finalize rates, pro-Obamacare groups and Democrats aren’t waiting, already saying that the pause in payments is part of a larger campaign of “sabotage” against Obamacare.
“Once again, Republicans are proving that they do not care how many families they hurt in their fevered obsession with sabotaging America’s health care laws,” House Minority Leader Rep. Nancy Pelosi, D-Calif., said after the announcement. “Their latest assault on health care will significantly increase premiums for millions of hard-working American families across the nation.”
After years of playing defense on Obamacare, Democrats are gearing up to go on the offensive, blaming Republicans for driving up healthcare costs. Senate Democrats have signaled that they are going to use the chamber’s August session as a messaging opportunity on healthcare and they have made healthcare a central part of the criticism of Supreme Court nominee Brett Kavanaugh. And they feel the recent decision by the Trump administration provides them more ammunition.
The payments in question are part of the risk adjustment program that requires Obamacare insurers with high profits to pay into a program that provides funding for insurers with lower profits. The goal is to spread costs, taking away the incentive for carriers to cherry pick only healthier customers, and making sure no one insurer suffers catastrophic financial losses by ending up with a disproportionately sicker pool of customers. The Centers for Medicare & Medicaid Services decided earlier this month to pause the payments under the program following a court ruling.
“The freeze on risk adjustment transfers is one among a constellation of acts of sabotage the Trump administration has undertaken to drive up costs for consumers and undermine health care,” Amanda Harrington, spokeswoman for the group Protect Our Care, told the Washington Examiner.
The group and congressional Democrats highlighted other acts of what they call “sabotage,” including the repeal of the individual mandate’s penalties in tax reform and the Trump administration’s push to expand access to cheaper plans that offer fewer benefits than Obamacare. Critics charge that these moves will lead to younger people fleeing the law’s exchanges, leaving insurers with customers with higher medical costs.
Insurers are hoping to get an idea by the end of the month on the future of the risk adjustment program.
A New Mexico judge ruled in February that the formula the federal government has used since 2014 to calculate the payments was flawed. Trump administration officials say the agency was forced to pause the payments while it decided what to do.
“If a court says do X or Y we have to comply with that,” CMS Administrator Seema Verma said at a recent public appearance.
On July 31, insurers must submit their formula for calculating medical loss ratio, which mandates how much of their premium revenues must be spent on medical costs. Obamacare requires any plan on the law’s insurance marketplaces to devote 80 percent of a premium dollar to medical costs and the remaining 20 percent to administrative costs and profits.
Insurers must decide how to factor in the risk adjustment pause into the calculation of the formula, said David Anderson, research fellow at Duke’s Margolis Center for Health Policy.
If an insurer doesn’t think they’ll get risk adjustment payments, they may raise premiums to compensate for the loss, Anderson added.
“At this point I am 97% confident that risk adjustment will get resolved in a reasonable manner and reasonable timeframe,” he said. “July 31 will give more information to change that estimate.”
If it isn’t resolved by then, another option for insurers is to file separate rates or medical loss ratio formulations: one that takes into account risk adjustment payments and another that doesn’t, Anderson said.
The same thing happened last year when President Trump toyed with getting rid of payments for cost-sharing reductions, which reimburse insurers for a requirement to lower out-of-pocket costs for low-income customers.
Currently some insurers have released proposed 2019 rates and several have sought to decrease premiums or only raise them by single digits.
But that could change if risk adjustment remains in limbo, said Larry Levitt, senior vice president for the research firm Kaiser Family Foundation.
“Insurers that are uncertain as to whether they’ll receive risk adjustment payments for 2019 could very well increase premiums to compensate, while those expected to pay into the system might not be so quick to decrease premiums,” he said.
