Ever since Obamacare repeal collapsed in Congress last year, the Trump administration has busied itself trying to kill the law through a thousand tiny (and, sometimes, very large) cuts. On Saturday, it seemed to take yet another vengeful chop at the statute, announcing that thanks to a court ruling from earlier this year, it would temporarily pause certain important payments to insurers, a legally unnecessary move that could potentially rattle the individual coverage market and maybe lead to higher premiums.
While it’s impossible to say for sure that this is yet another sabotage attempt, the circumstantial evidence certainly makes it look like one.
This latest controversy involves Obamacare’s risk-adjustment system, in which the government collects money from health plans that sign up relatively healthy customers, then pays that money out to insurers with sicker enrollees. The payments, worth billions of dollars a year, are designed to discourage carriers from cherry-picking low-risk insurance shoppers, while keeping health plans afloat if they get unlucky and end up stuck paying the medical costs of an unusually ill group of patients. However, a number of insurers have filed lawsuits challenging the government’s risk-adjustment formula, and in February a federal district court in New Mexico struck down the methodology the government used through this year on fairly narrow technical grounds. The judge concluded that, even though federal regulators may have had good policy reasons for doing so, they failed to adequately explain during the official rule-making process why they designed the formula to be budget neutral for the government.
The Trump administration is continuing to litigate the suit and has formally asked the judge to reconsider his decision. But in the meantime, the government says that, due to the court’s decision, it will no longer collect or distribute any more risk-adjustment payments until the case is all sorted out. In her statement Saturday, Center for Medicare and Medicaid Services Administrator Seema Verma said she was “disappointed by the court’s recent ruling” and called for a “prompt resolution that allows CMS to prevent more adverse impacts on Americans.”
This is an extremely strange decision by the administration. When a single trial court judge strikes down a regulation, the government typically doesn’t just stop enforcing it. “I haven’t heard of such a thing happening before,” University of Maryland law professor Frank Pasquale told me. Instead, the Justice Department can appeal the decision to a higher court and ask for a stay stopping the lower court’s decision from going into effect. It can choose to interpret the ruling narrowly, so that it doesn’t apply to the entire country. If it wants to, the administration can also issue a new, “interim” version of a regulation that goes into effect while the litigation rolls on. That would be a triflingly easy thing to do in this instance, since the administration has already tweaked the risk-adjustment rule for next year to address the court’s concerns (it added some verbiage explaining why the formula needed to be budget neutral), and it could easily release a similar regulatory patch covering 2014 through 2018—which are the years at issue in the lawsuit. (The administration has deployed interim rules plenty in the past, such as when it wanted to exempt businesses from having to provide contraception coverage to employees.) “There’s a whole bag of tricks you can draw on,” University of Michigan law professor Nicholas Bagley said. The fact that courts have actually split on the risk-adjustment suits—a federal district judge in Massachusetts rejected a separate challenge to the government’s formula in January—makes the government’s decision to roll over and play dead seem even odder.
The simplest explanation, of course, is that the White House sees all of this as an excuse to throw another wrench into the Affordable Care Act. “They’re doing this because they want to,” Georgetown University Law Center professor David Super said. “They’re doing this because they don’t like these payments.”
It’s difficult to say exactly how much damage the administration’s move will do to the insurance market. Technically, insurers are not supposed to raise their premiums in order to make up for losses from previous years. But there’s quite a bit of money at stake over this issue; CMS estimates that risk-adjustment payments for 2017, which insurance companies are still waiting on, will total $10.4 billion, and health plan executives are already warning that putting a freeze on that cash will lead to higher prices for customers, one way or another. “Any action to stop disbursements under the risk-adjustment program will significantly increase 2019 premiums for millions of individuals and small-business owners, and could result in far fewer health plan choices,” Justine G. Handelman, a senior vice president of the Blue Cross and Blue Shield Association said Saturday.
The bigger issue may be that some smaller insurers may simply lack the financial resources to survive while waiting for money that they’re owed. Others could decide that, after years of watching the Trump try to undermine Obamacare and cost insurers money in the process, selling on the individual market simply isn’t worth it. “As of now, insurers that are in the market are generally making money, and willing to stick it out,” Kaiser Family Foundation Senior Vice President Larry Levitt told me. But “some insurers may decide there are only so many hits they’re willing to take.” The administration’s latest move certainly isn’t going to do-in Obamacare. But it is delivering one more wound.