Follow us on facebook


Trump Complies With ObamaCare Court Ruling on Risk Adjustment, And Dems Cry ‘Sabotage’

Regulations: After U.S. District Court in New Mexico found that a complex and highly controversial ObamaCare cross-subsidy scheme was “arbitrary and capricious,” the Trump administration temporarily halted the program. Democrats then attacked Trump for trying to “sabotage” ObamaCare.

X

At issue is a part of ObamaCare that few have ever heard about. It’s called “risk adjustment.” And at its core it is nothing more than a massively complex system of cross-subsidies between insurance companies in each state.

ObamaCare created the risk adjustments to compensate for the market distortions its insurance regulations created. Because ObamaCare bans insurers from setting premiums based on health risks, healthy people overpay for coverage, and the sick underpay.

As a result, insurance companies that happen to attract mostly healthy customers would be getting an unfair bonus.

The risk adjustments are supposed to even that out by requiring insurers who attract healthier customers to pay in, while those with costlier enrollees take money out.

That’s the idea, anyway. But in practice, the ObamaCare risk adjustment program has been a disaster, often forcing smaller insurers to write checks to the biggest insurance companies in the state.

News accounts have called it “risk adjustment gone wrong” and “reverse Robin Hood.”

Last year, for example, New Mexico Health Connections — a small nonprofit co-op created by ObamaCare — had to pay almost $9 million into the risk adjustment program. Meanwhile, Blue Cross Blue Shield of New Mexico netted more than $8 million.

The same thing happened across the country. Blue Cross Blue Shield of Florida got almost $490 million, while Celtic Insurance had to pony up $161 million.

Blue Shield of California got $370 million from the risk adjustment program last year, while HealthNet paid in $95 million and the Local Initiative Health Authority for Los Angeles County had to write a check for $12.4 million.

In Mississippi, UnitedHealthcare and Humana received a combined total of $16 million in risk adjustment payments, while Ambetter of Magnolia coughed up $15 million. (We’ve posted the federal report detailing all these payments here.)

So, while the risk adjustment program was supposed to increase competition, it’s had the opposite effect, driving smaller, innovative, lower cost competitors out of the market, while rewarding already dominant carriers. Some critics allege that big insurers game the system to increase their risk adjustment payments.

Suing For Relief

New Mexico Health Connections was one of several insurers to sue the federal government. The U.S. District Court agreed that one key part of the scheme — the use of statewide average premiums to determine payments due — was “arbitrary and capricious,” and so violated the federal Administrative Procedures Act.

As it turns out, the ruling came just as the administration was about to release its 2018 risk adjustment payment schedule, which would have shifted $10 billion among insurers. It also likely would have, once again, forced many smaller insurance companies to pay huge bills to the biggest insurers in the state.

When you understand the context, the Trump administration’s decision to halt those payments until it can figure out what to do seems reasonable. (A Massachusetts court had upheld the risk adjustment scheme.)

But Democrats are bashing Trump for creating “chaos” in the insurance market, saying it will increase premiums. And, naturally, the media are playing along, without providing any context.

It’s almost as if no matter what Trump does, his critics will attack him.

YOU MIGHT ALSO LIKE:

Dems Complain About Massive ObamaCare Premium Hikes — After Ignoring Them For Years

New Health Insurance Rule Gives Americans More Choices, Better Options

A Mountain Of Surplus Cheese, Brought To You By The Government


More Commentary and Opinion from Investor’s Business Daily.

Want to make more money in the stock market? Start with IBD University.

Source link

No comments.

Leave a Reply