Trump Administration Restarts Obamacare Program That It Suspended Two Weeks Ago

Insurers will be relieved, and markets will avoid a big hit.

The Trump administration says it is restarting a key Affordable Care Act program, a little more than two weeks after announcing its suspension.

At the time, the administration said it was stopping the program, known as “risk adjustment,” in order to comply with a federal court ruling. Critics questioned that explanation, noting that the administration had options that would allow the program to keep operating, and suspected yet another effort by President Donald Trump and his allies to sabotage Obamacare.

Now the administration has gone ahead and used one of the available options. And that’s a big deal, because of the critical role risk adjustment plays in keeping insurance markets stable.

Risk adjustment is basically a set or payments that flow back and forth among insurers ― in this case, among the carriers that sell coverage to small businesses and directly to individuals. Insurers that end up with lots of relatively healthy customers put money into the program, while insurers with relatively sick customers get money out of it.

The idea is to make sure carriers aren’t making extra profits simply by finding ways to attract the healthiest beneficiaries ― say, by constructing doctor networks or pharmacy formularies that patients with cancer, HIV or other serious diseases would try to avoid. The federal government calculates the amounts, collects the contributions and makes the payouts.

Each year, billions of dollars go through the Affordable Care Act’s version of the scheme, with some insurers paying large sums and others receiving them. But some insurers have sued the federal government, arguing that the existing system doesn’t treat them fairly. In one of those cases, a lower level federal judge in New Mexico sided with the plaintiffs and declared the formula invalid, at least until the federal government could explain its rationale. The Trump administration subsequently asked the judge to reconsider his ruling.

Not too many observers paid attention to the court decision until early July, when the Center for Medicare and Medicaid Services (CMS), which administers the risk adjustment program, announced it was halting payments until the courts cleared up the legal ambiguity.

The decision stunned insurers, who had expected the money without delay. It also surprised legal scholars, who wondered why the administration wasn’t pursuing other remedies that would have allowed it to let the program’s payments continue. 

One of those remedies was to issue a new rule, on an expedited basis, clarifying and explaining the payment formula. And that is precisely what the administration has now done. The new rule won’t formally end the ongoing litigation, but it means the payments can start up again ― at least for now.

“This rule will restore operation of the risk adjustment program, and mitigate some of the uncertainty caused by the New Mexico litigation,” Seema Verma, the CMS administrator, said in a statement Tuesday evening. “Issuers that had expressed concerns about having to withdraw from markets or becoming insolvent should be assured by our actions today.  Alleviating concerns in the market helps to protect consumer choices.”

Why the administration didn’t try this approach initially remains a mystery. But at a time when Trump and his allies have taken so many other actions to undercut the Affordable Care Act ― by slashing funds for counselors that assist in enrollment, for example, and zeroing out the financial penalty for people who don’t get insurance ― some of the law’s defenders seemed pleased that this particular controversy was going away.

“Maybe CMS had to precipitate a crisis before it could muster the political will to do the right thing,” Nicholas Bagley, a University of Michigan law professor who had been among those critical of the administration’s actions, wrote on Twitter Tuesday evening. “That’s not a good way to run a government, but I’m inclined here to applaud the agency for finally doing the right thing. Better late than never.”