Insurers scramble after Trump suspends billions in ObamaCare payments

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The Trump administration’s abrupt suspension of billions of dollars in payments to ObamaCare insurers has prompted new warnings of rising premiums as health companies scramble to adjust.

Insurers are pressing the administration to resolve the issue and resume the payments, arguing that premiums will rise for ObamaCare enrollees if funding is cut off.


Democrats, meanwhile, are seizing on the unexpected action by characterizing it as another example of the administration sabotaging ObamaCare, a key Democratic message heading into the November midterm elections.

The flurry of activity is the result of a surprise announcement Saturday by the administration that it had suspended $10.4 billion in funding that is supposed to be paid to insurers to help them provide coverage to particularly sick and costly enrollees.

Insurers denounced the move.

“This action will significantly increase 2019 premiums for millions of individuals and small-business owners and could result in far fewer health plan choices,” Scott Serota, CEO of the Blue Cross Blue Shield Association, said in a statement. “It will undermine Americans’ access to affordable coverage, particularly those who need medical care the most.”

Democrats, meanwhile, used the opportunity to point the finger at Republicans.

“Republicans are doing a bang-up job ensuring they are properly blamed for health care rate hikes this fall,” Matt House, a spokesman for Senate Democratic Leader Chuck Schumer (N.Y.), said in a Monday tweet. 

Insurance lobbyists said they were puzzled as to why the administration suspended the payments at this time.

The administration cited a federal court ruling in New Mexico that found the administration did not properly justify its formula for dispensing the funds.

But that explanation did little to calm the nerves of insurers.

“Some of them are really freaking out,” one health-care lobbyist said. “They’re just trying to figure out what the numbers are at this point.”

The main insurance trade associations in Washington have been organizing calls with their member companies and trying to coordinate a response. 

Legal experts said there were several ways the administration could have dealt with the situation, without going so far as to suspend the program. For example, it could have provided a more detailed explanation of the formula to the New Mexico court and kept the payments going.

An insurance industry source said one fix the industry is pushing for is providing that additional explanation to the court, through what is known as an interim final rule, in order to resume payments.

But a bigger concern for now is how long the suspension of payments will last. If the administration makes a good faith effort to resolve the court ruling, the issue could be fixed within weeks and not have a significant long-term impact. 

However, if the administration is trying to undermine ObamaCare, payments might not resume anytime soon, and that could lead to lasting damage.

The risk adjustment program does not involve taxpayer funds. Instead, money is collected from insurers that have healthier enrollees overall and then given to insurers with sicker, more expensive enrollees to help cover their costs.

Officials from the Centers for Medicare and Medicaid Services (CMS), the federal agency that oversees ObamaCare, have been reaching out to insurance industry officials. 

“CMS started the notification process with insurers and stakeholders immediately following our announcement this weekend,” a CMS official said Monday. “We are continuing that process today and over the course of this week.”

More broadly, the move contributes to a string of actions from the Trump administration, including the cancellation of other ObamaCare payments last year, that have added to insurers’ uncertainty and frustration. Eventually, experts say, some insurers could simply get fed up and exit ObamaCare markets, leading to fewer choices for consumers.

David Anderson, a health policy researcher at Duke University, said the administration’s latest move could lead to “more hassle, more aggravation, more frustration for insurers trying to make this market work.”

If an insurer does not have the financial cushion to deal with losing the payments, “some insurers may say this is not a risk that we’re willing to take and walk away,” he said.

Mike Kreidler, the insurance commissioner for Washington state, said he is considering allowing insurers to file two sets of proposed premium increases for next year: one set for if the payments end up coming through and a higher proposed premium increase in case the payments remain suspended.

“We want to make sure that we keep our insurers in the market,” he said.

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