Insurers See ‘Uncertainty’ From Trump CMS Payment Halt

July 09--The Trump administration's decision to halt federal health insurance transfer payments will lead to uncertainty and market disruption, insurers say.

The Centers for Medicare and Medicaid Services, citing a federal court decision invalidating a statewide average premium, halted a program for individual and small group commercial markets that called for collections and payments of $10.4 billion for 2017. Known as the risk adjustment program, it allocates insurance premium dollars to plans that enrolled higher risk and less healthy members from plans that enrolled lower risk and healthier members.

Payments and collections of risk adjustment payments and charges were scheduled to begin in August.

"It will create more market uncertainty and increase premiums for many health plans -- putting a heavier burden on small businesses and consumers and reducing coverage options," the industry's trade group, America's Health Insurer's Plan, said in a statement.

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Two health insurers in Connecticut, Anthem Inc. and Cigna Corp., referred to the AHIP statement when asked about the impact of the federal payment interruption. A spokeswoman for ConnectiCare said the insurer is "monitoring developments" related to risk adjustment payments and plans to file its 2019 small group and individual plan rates next week.

A spokeswoman for the state Insurance Department said the agency is not commenting because officials are reviewing the federal government's announcement. Rate filings by Connecticut health insurers for 2019 are due next week.

Analysts were less certain than the industry about the impact of the payment interruption on insurers.

Nicholas Bagley, an assistant professor of law at the University of Michigan Law School, wrote in a health services research blog, "The Incidental Economist," that the Centers for Medicare and Medicaid Services is wrong to interpret the federal court ruling as preventing it from making payments.

"The truth is that the Trump administration has lots of options. It's just choosing not to exercise them," he said.

Jeffrey Loo, an analyst at CFRA Research, said health insurers are preparing 2019 rates "and this suspension adds financial uncertainty. .

"We believe the impact will affect smaller insurers who have booked these payments on their balance sheet, but we believe the impact to the larger publicly traded health insurers is not as material," he said.

Andrea Harris, an analyst at Height Securities in Washington, said reports of problems due to a halt in payments may be overheated.

"Investors should read headlines about the delay in risk adjustment payments cautiously," she said. "We believe they overstate the risk that CMS will not make risk adjustment transfers or the move will upend the Affordable Care Act insurance markets."

The federal agency's decision to suspend collections and payments until litigation is resolved is a short-term problem for Anthem, an insurer "that historically benefits from the risk adjustment program," Harris said.

The issue is expected to be resolved by the end of the year and risk adjustment transfers will be completed "on time or with only minimal delay," she said.

However, Leerink analyst Ana Gupte said the change on the U.S. Supreme Court following the retirement of Justice Anthony Kennedy will likely favor Republicans and "adds to the uncertainty" about the future of the Affordable Care Act health exchanges.

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