07.25.2018 / Press Release

Trump Administration’s Decision to Back Down on Risk Adjustment Policy Is Good News for the Stability of Private Coverage

Washington, D.C.—Yesterday, the Centers for Medicare and Medicaid Services (CMS) reversed a policy it announced on July 7 that threatened to fundamentally undermine the individual market, endangering health care for millions of people who get their health coverage through the health insurance marketplace. CMS said this reversal will permit the agency to distribute more than $10 billion out of a “risk adjustment” pool which is funded not by the federal government, but by insurers who participate in the individual and small-business markets. The risk adjustment program collects funds from insurers that cover healthier people and redistributes those funds to plans that have sicker enrollees. It thus balances out the risks among insurers in the individual market and the small group market.

Following is the statement of Families USA Executive Director Frederick Isasi:

“We are relieved that the Trump administration has reversed its ill-conceived decision to stop risk adjustment payments that help health insurers cover people with preexisting conditions. While the risk adjustment program costs the government nothing, it is vital to the functioning of the market for people who buy coverage on their own because it facilitates the pooling of risk, keeping costs stable for consumers, including people with preexisting conditions.

“The risk adjustment program prevents health insurance plans that happen to get a larger share of high-cost enrollees than other plans from being at a financial disadvantage. Without risk adjustment in place, plans would have had a strong financial incentive to cherry-pick patients who cost less to insure and put up as many barriers as possible for people with preexisting conditions and others with high health care costs.

“We hope the administration will follow its own precedent and reverse other policies which harm consumers, especially people with preexisting conditions, including the Short-Term Limited Duration Plan rule and the Association Health Plan rule.”

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