State’s health insurers grapple with uncertainty over frozen federal risk payments

The New Jersey Department of Banking and Insurance has extended the premium filing deadline for health insurers to July 18, from the original deadline of Wednesday.

Health insurers in the state were scrambling Monday to understand the implications of stalled risk adjustment payments announced over the weekend, even as Wednesday’s state deadline loomed file their premiums for next year.

In the memo sent to insurers Monday, DOBI said that the insurers should file their premiums for 2019 accounting for risk adjustment payments, which would only be realized in 2020.

The issue is unlikely to affect large group insurance rates, but is a problem for small businesses and anyone buying plans on the Affordable Care Act marketplace.

The issue arose late last week when the Centers for Medicare and Medicaid Services released a statement asking for clarification on conflicting federal court orders that sought to change how insurers receive federal funding used to keep premiums low and keep them from seeking low-risk members. The move by President Donald Trump’s administration is being seen as a politically motivated one, rather than one that actually affects the operation of the ACA marketplace.

At least $10.4 billion has been stalled as a result, according to CMS.

Experts in the industry have said it appears to be a political, rather than an insurance issue.

DOBI Commissioner Marlene Caride said in a statement Tuesday that the move by CMS was “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.”

“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,” Caride said. “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.”

Risk adjustment, in brief, is a permanent funding system from pooled insurers’ payments, which is redistributed to insurers for taking on higher-cost members. The anticipated funds are calculated into the insurers’ premium filings each year.

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Linda Schwimmer, CEO and president of the New Jersey Health Care Quality Institute.

Linda Schwimmer, CEO and president of the New Jersey Health Care Quality Institute said it is too early to tell what will happen, but the uncertainty is a problem in and of itself.

“Higher levels of uncertainty lead to rate increases; the amount of these increases are impossible for us to predict without more information,” Schwimmer said.

The national America’s Health Insurance Plans group said it was disappointed in the move by the administration. In a statement, AHIP said:

“This decision comes at a critical time, when insurance providers are developing premiums for 2019 and states are reviewing rates. This decision will have serious consequences for millions of consumers who get their coverage through small businesses or buy coverage on their own. 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. And costs for taxpayers will rise as the federal government spends more on premium subsidies.

“We agree that a quick resolution is needed to avoid greater harm to the individual and small group markets. More than ever, American businesses and families want affordable coverage and care they need and deserve. We encourage the administration to re-evaluate its decision and work with all stakeholders to make health care more affordable for all Americans.”

The Blue Cross Blue Shield Association, which represents all BCBS entities nationally, echoed a similar sentiment.

“The action taken today will create turmoil not only for those in the individual market — particularly as insurers finalize their offerings for the next open enrollment that begins in November — but also for the millions of businesses that rely on the small group market to provide affordable insurance options for their employees,” according to the BCBSA statement.