Speed Reads

ObamaCare under the knife

Health insurers warn of premium hikes after Trump withholds ObamaCare payments

On Sunday, the insurance industry and outside analysts warned that the Trump administration's decision Saturday to at least temporarily withhold $10.4 billion in risk-adjustment payments to insurance companies will likely drive up premiums and might force more insurers out of the Affordable Care Act's marketplace. The risk-adjustment payments are a mechanism the ACA — also known as ObamaCare — uses to reimburse insurance companies for covering people with pre-existing conditions and chronic illness, ostensibly paid for by profitable insurers with relatively healthier clients.

Creating this "new market disruption" at the "critical time" when insurers are setting next year's premiums "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," the insurance industry group America's Health Insurance Plans (AHIP) said in a statement. "And costs for taxpayers will rise as the federal government spends more on premium subsidies." Eric Hillenbrand at AlixPartners consulting group said the move will affect whether insurers decide to "participate in the exchanges" as well as "what premiums to charge if they do."

The Centers for Medicare and Medicaid Services (CMS) said it is suspending the payments because of conflicting court rulings — in January, a federal court in Massachusetts upheld the ACA's risk-adjustment formula while a federal court in New Mexico invalidated it in February. CMS Administrator Seema Verma, an ACA critic, said the Trump administration was "disappointed" in the New Mexico court's decision and asked it to reconsider. But the Trump administration has been taking administrative steps to undermine ObamaCare after its legislative efforts failed last summer, as well as thwarting efforts to shore up the law. What the Trump team's "effectively doing is dismantling pieces of [the ACA] without replacing them," Hillenbrand tells Reuters. "It moves us back to some extent to the status quo where people with pre-existing conditions found it very difficult to get insurance."