Tuesday, July 10, 2018

Sabotage triage: New Jersey's instructions to individual market health insurers

It's hard to keep up with Trump administration sabotage of the ACA marketplace. Credit New Jersey's Dept. of Banking and Insurance (DOBI) with doing what it can to help health insurers cope.

In light of CMS's abrupt and capricious suspension of risk adjustment payments* to marketplace insurers in response to what should have been a minor legal glitch, DOBI has moved the deadline for individual market insurers to file rate requests from tomorrow (July 11) to July 18. DOBI has also instructed insurers to take two contingencies into account: the possibility that risk adjustment payments will remain suspended, and the likelihood that CMS (yes, the same CMS that planted the risk adjustment IED late last week) will approve the state's waiver application for federal funding for a reinsurance program, submitted on July 2.

The guidance issued today instructs insurers to file rate requests that a) assume risk adjustment payments will continue for 2019, and b) do not take the possibility of reinsurance into account. But insurers are also instructed to a)  discuss the potential impact on rates if risk adjustment payments were to be discontinued for 2019, and b) file alternative rates that assume the reinsurance program will be in place in 2019, under the terms proposed in the state's waiver application.

Those terms would pay 60% of insurers' costs for enrollees whose medical costs exceed $40,000 in the year, up to a cap of $250,000. The expectation is that the alternative rate request taking this program into account will be at least 15% below the baseline request -- if not, the insurer must provide "detailed actuarial support" to justify a smaller rate reduction.

This is the second straight year that DOBI and other state insurance departments have had to ask or instruct insurers to file rates that take into account the possibility that the Trump administration will gratuitously stiff insurers, withholding money due under the express terms of the ACA. Last year it was reimbursement for the Cost Sharing Reduction subsidies that insurers are obligated to provide to qualifying marketplace customers; when Trump cut off the payments last October, CSR costs had to be priced into premiums, with paradoxical effects that almost certainly boosted enrollment among those eligible for subsidies.

Now here we go again with risk adjustment. In response to the suspension of payments and transfers, DOBI Commissioner Marlene Caride issued this statement:
Despite actions taken at the federal level to undermine the Affordable Care Act, New Jersey is working aggressively to create stability in the market and to ensure that residents have access to affordable quality health care. The decision to halt risk adjustment payments is another attempt by the federal government to create uncertainty in the market and was announced days before rates are due for the 2019 plan year in our state. The department has issued guidance to carriers to help prevent further disruption, and remains committed to protecting New Jerseyans from the harmful impact of federal actions against the ACA.
It may seem odd to accuse the federal government (via action taken by CMS) of acting deliberately "to create uncertainty in the market" even as the state asks CMS to grant a waiver providing $218 million in federal funding in 2019 and $1.3 billion over five years for a program meant to provide stability. But that's life under Trump. With one hand, CMS sticks a wrench in the spokes of the ACA-compliant individual market; with the other, it works with state insurance departments in the old way to define the parameters of a viable program.  CMS has actively encouraged waiver proposals for federal reinsurance funding, since reinsurance reduces federal subsidies by reducing premiums, savings that can be passed through to the state. It has approved such waivers for Alaska, Minnesota and Oregon to date. The agency is subject to contrary impulses.

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* The Risk adjustment program,  a permanent feature of the ACA, is similar to a program that's part of Medicare Advantage and other programs under which the federal government pays private insurers. Designed to discourage insurers from "cherry picking" the healthiest customers, it transfers money from insurers whose enrollees file higher-than-average claims to those whose enrollees' claims are higher than average. In 2017 those transfers, now suspended, total $10.4 billion. Charles Gaba has staked out insurers' net transfers (gains and losses) under the program, derived from CMS's annual Risk Adjustment Summary Report for 2017. Legal scholar Nicholas Bagley exposes the bogus nature of CMS's claim that a court order required the suspension of payments here.

Update, 9:00 p.m.: Fight off one Trump sabotage one day, another turns up before your ink is dry. This afternoon CMS announces they're gutting funding for ACA navigators (enrollment assisters) - and requiring navigators to inform customers about short-term and association health plans. The latter can't happen in Jersey, as short-term plans are banned and AHPs very limited.

Related:
Six ways New Jersey is fighting off Obamacare sabotage
Time for New Jersey insurers to do their part to counter ACA sabotage

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