The Trump administration said Saturday that it is temporarily halting billions of dollars of payments created to help insurers meet the Affordable Care Act requirement that they provide coverage regardless of whether a person is healthy or sick.
CMS said the cuts are warranted because Americans have grown more aware of the marketplace, and navigators enrolled fewer than 1 percent of the 12 million Americans who signed up for coverage under Obamacare this year.
Insurance stocks may be a focus in Monday morning's trading.
She noted it is the latest action by the administration of President Donald J. Trump, which has weakened the landmark law that expanded healthcare for many more Americans. Administration officials tout these plans as more affordable, but they're cheaper because they don't have to meet the ACA's requirements for decent health plans, like including maternity care and prescription drug coverage, and charging the same rate for people with preexisting conditions. The White House supported two attempts in Congress past year to repeal the program, which insures about 20 million Americans.
FILE PHOTO: A man fills out an information card during an Affordable Care Act outreach event hosted by Planned Parenthood for the Latino community in Los Angeles, California September 28, 2013.
For years, Molina and other insurers have complained that the risk-adjustment program unfairly rewarded many Blue Cross Blue Shield plans that had excess administrative costs and higher premiums. Another court in MA had upheld the program in January.
Risk adjustment is an important part of the ACA.
"We were disappointed by the court's recent ruling", Seema Verma, administrator for the Centers for Medicare and Medicaid Services (CMS), which administers the program, told The Wall Street Journal in a statement.
The New Mexico ruling found fault with the formula used by the government to calculate the payments, saying it was "arbitrary and capricious". "It moves us back to some extent to the status quo where people with pre-existing conditions found it very hard to get insurance". Paying off companies that lose money was supposed to be a temporary adjustment to changing markets.
While some may say this means no government money is involved, this ignores the concern expressed in the New Mexico court decision.
A professor who follows Obamacare said it is unclear if the payments' suspension will result in higher premiums. "There is a need to analyze insurers case-by-case and account for their competitive landscapes", said Tinglong Dai, an associate professor of operations management and business analytics at the Johns Hopkins University Carey Business School.
There have been winners and losers in risk adjustment.
The New York Times suggested the payment freeze could "increase uncertainty in the markets and drive up premiums this fall".