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The Trump administration said Saturday that it is temporarily halting billions of dollars of payments designed to help insurers meet the Affordable Care Act requirement that they provide coverage regardless of whether a person is healthy or sick.

administration said it was withholding $10.4 billion

 in the so-called "risk adjustment" payments, citing a district court ruling from earlier this year in New Mexico. While the administration says it is required to stop payments because of the court decision, insurers say the move could result in higher premiums for millions of individuals and small businesses.


The risk adjustment program plays an important role in the ACA by pooling risk for insurers, transferring funds from insurers who enroll healthier members for relatively less, to those that take on higher costs in order to enroll sicker members. The idea is to insulate insurance companies from the cost of enrolling people with pre-existing conditions, and remove the incentive for insurance companies to cherry pick healthy people.


The New Mexico ruling found fault with the formula used by the government to calculate the payments, saying it was "

." But another district court in Massachusetts upheld the formula.


The announcement came as insurers were awaiting an annual report that usually comes at the end of June, informing them of whether they owe money into the risk adjustment program or will be paid out for the previous year. Insurers say the sudden halting of those payments creates uncertainty at a critical time, as they are currently developing their premiums for 2019.

Insurance companies responded quickly on Saturday with their disapproval. In a statement America's Health Insurance Plans, the trade association for health insurance companies, said they are "very discouraged by the new market disruption brought about by the decision to freeze risk adjustment payments."

"Without a quick resolution to this matter, this action will significantly increase 2019 premiums for millions of individuals and small business owners and could result in far fewer health plan choices. It will undermine Americans' access to affordable coverage, particularly for those who need medical care the most."

"Insurers hate uncertainty, and when faced with it tend to raise premiums to hedge their bets," says Larry Levitt, Senior Vice President at the Kaiser Family Foundation. He says halting the risk adjustment program will disrupt the individual markets, and might even cause insurers not to participate next year.

"When the rules of the game change after the fact – insurers don't necessarily see the federal government as a particularly reliable partner right now," Levitt says. "This is one of several steps the Trump administration has taken to undermine the ACA."

Levitt says the administration's announcement was "a little perplexing," given that the legal fight over the conflicting rulings in New Mexico and Massachusetts is still ongoing.

"Normally you would expect an administration to look for ways to minimize the uncertainty and minimize the effect as these cases play out," he says. "So it seems like an extreme step to halt this program nationally based on a decision by one district court judge."

But to Rodney Whitlock, Vice President of Health Policy at ML Strategies and former Republican congressional aide, it's not perplexing at all.

"What you have to keep in mind is ultimately the intent of the administration," Whitlock says. "The executive order the president signed, not long after he got to the White House after the [Inaugural] Parade was effectively, 'We're declaring war on the Affordable Care Act.'" Whitlock says, the goal has been to make the marketplace as inhospitable as possible for participating plans, and this is just one more step in that direction.


Indeed, a series of actions by the administration have undermined the ACA. Last month the Department of Justice decided not to defend the law in a court challenge in Texas, jeopardizing the part of the law that protects people with pre-existing conditions from being denied coverage, 

the administration halted important subsidies for insurers

"They can't just say, 'Well, we're new, we don't like what the previous guys did, so we're going to do something different,'" Whitlock says. The administration has to have a legal justification for their actions.

The pro-ACA group Protect Our Care issued a statement from its executive director, Brad Woodhouse, Saturday after the administration announced its decision regarding risk penalty payments, characterizing the move as further chipping away at the Affordable Care Act.

"The Trump administration just keeps pushing their destructive repeal-and-sabotage agenda, no matter the cost to the American people," the statement reads. "Following through with this latest act of sabotage could raise rates for all consumers even more — on top of the rate hikes they have already caused — and is without a doubt an escalation in the Trump administration's war on people with pre-existing conditions."

The administration is taking legal steps to challenge the ruling in New Mexico, says Levitt. But, he adds that there's "something of a pattern now of the Trump administration using legal cases as hooks to undermine the ACA."


"I think insurers are going to be watching very closely what the administration says in court, and whether this is a sign of further steps to undermine the law, or a good faith effort to try to comply with the judge's order," he says.  Copyright 2019 NPR. To see more, visit https://www.npr.org.

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Citing a February ruling from a district court in New Mexico, the administration said it will halt risk adjustment payments required by the ACA. Insurers say the move will increase premiums.

Trump administration freezes payments required by the Affordable Care Act

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