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HHS Proposes Regulations to Address the 2018 Risk Adjustment Program


· 5 minute read


· 5 minute read

PPACA; Adoption of the Methodology for the HHS-Operated Permanent Risk Adjustment Program for the 2018 Benefit Year Proposed Rule, 45 CFR Part 153, 83 Fed. Reg. 39644 (Aug. 10, 2018); Press Release: CMS issues proposed additional rule to address risk adjustment program for the 2018 benefit year (Aug. 10, 2018)


Press Release

HHS has issued proposed regulations that would re-adopt the risk adjustment methodology previously established under the risk adjustment program for 2018. As background, the risk adjustment program, established by the Affordable Care Act (ACA), applies to non-grandfathered plans and insurers in the individual and small group markets. In an effort to stabilize premiums and reduce incentives for insurers to avoid higher-risk enrollees, plans with lower-than-average actuarial risk are assessed charges that are used to make payments to plans with higher-than-average actuarial risk. A district court ruling in New Mexico barred the agency from using the methodology in the risk adjustment transfer formula for 2014–2018 on the grounds that HHS did not adequately explain its decision to adopt a methodology that ensures that amounts collected from insurers equal payments made to insurers (budget neutrality). In July, HHS reissued final regulations that explained the rationale for the use of statewide average premiums under the risk adjustment program for 2017—thereby restoring operation of the program after a short pause in risk adjustment collections and payments based on the court ruling (see our Checkpoint article).

The proposed regulations would allow the program to continue for 2018, and the preamble provides additional explanation in support of budget neutrality and why HHS views use of statewide average premiums as essential to the success of the program.

EBIA Comment: As HHS notes, health insurers are in the process of determining the extent of their participation in the Exchanges and the rates and benefit design for plans they will offer for 2019, so uncertainty about payments under the risk adjustment program for 2018 could lead insurers to substantially increase 2019 premiums to account for the uncompensated risk associated with high-risk enrollees. These proposed regulations are aimed at maintaining stability and predictability in the individual and small group markets by ensuring that collections and payments under the risk adjustment program may be made for 2018 in a timely manner. For more information, see EBIA’s Health Care Reform manual at Sections XX.E (“Mechanisms to Allocate Risk: Risk Adjustments”) and XXI (“Exchanges, Qualified Health Plans (QHPs), and CO-OPs”).

Contributing Editors: EBIA Staff.

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