The Centers for Medicare and Medicaid Services (CMS) recently announced it will be suspending the risk adjustment payments that go to help cover the costs for insurers when covering the sickest payments, and Maryland’s insurers are warning that his could mean further market destabilization and even higher premium rates.
These payments have been designed to prevent or limit insurers from losing money on sick (and therefore expensive) patients and from choosing only healthy patients; they have also helped insurers stay afloat as the Affordable Care Act granted healthcare coverage to more people.
CMS says its hand was forced in the decision because of a federal court ruling that the formula for calculating these payments could not use a statewide average premium. CMS has appealed the decision, but in the meantime, billions of dollars in expected insurer payments are on hold. The timing is particularly unfortunate, as insurance companies are currently deciding on their premium rates for the next year. Introducing more uncertainty to the market could signal another round of high rate spikes.
In the meantime, Gov. Larry Hogan and lawmakers are awaiting word from CMS about whether they can establish a reinsurance program in the state that would implement a $426 million fund to help insurers cover the most expensive claims. This would be separate from the federal risk adjustment payments, and the goal is for insurers to be able to reduce their premium rates by up to 30 percent.