ABQ Business First: NM Health Connections files lawsuit against feds
Aug 1, 2016, 1:57pm MDT
New Mexico Health Connections on Friday filed a lawsuit against the federal government over a risk adjustment program mandated by the Affordable Care Act.
The lawsuit lists as defendants the U.S. Department of Health and Human Services; Centers for Medicare and Medicaid Services; Sylvia Mathews Burwell, secretary of HHS; and Andrew M. Slavitt, acting administrator for CMS. The lawsuit takes issue with the way the federal government carries out risk adjustment in the marketplace. It asks that the risk adjustment program be halted while the government comes up with a new process to enforce the mandate.
Risk adjustment was intended to encourage insurers to take on higher-risk patients. The program, says Health Connections CEO Dr. Martin Hickey, transfers funds from health plans that don't spend all of their premiums on patient care to those who do. Companies that insure sicker people might lose money in the process of covering those medical needs, so the idea is to redistribute the wealth, taking money away from companies that spent less because they insured healthier people and giving it to insurance providers who spent more. Every year companies are assessed by a risk adjustment fund, based on CMS and HHS calculations, and that money is redistributed to providers in the marketplace based on their losses. In 2014, for example, New Mexico Health Connections paid $6.7 million into the risk adjustment fund.
"It's certainly the right thing to do in principle," said Hickey. "I think it makes sense."
The real problem, he says, is how the federal government has decided to enforce this statute.
"The risk adjustment methodology developed and implemented by CMS, at the direction of HHS, is arbitrary, capricious and unlawful," reads the lawsuit, filed in U.S. District Court in New Mexico. "It flouts Congressional intent and the express mandate of the risk adjustment statute."
A CMS spokesperson said it's not the agency's practice to comment on pending litigation.
Hickey says the biggest issue is risk adjustment's use of average statewide premiums. The formula accounts for actual spending by companies, he says, but also factors in the average statewide premium. Lower premiums, which might be far below the statewide average, increase the amount of money insurance providers have to pay because of the way the formula works. He says this drives insurance providers to increase premiums, as lower premiums will increase the amount of money they have to contribute to the fund.
"All of us are raising our rates substantially because of this imbalance in the risk adjuster," Hickey said.
Hickey adds that the premium portion of the calculator also punishes providers that sell lower level products. Health insurance plans are divided into platinum, gold, silver and bronze groups, and he says offering a bronze-level product, which has low premiums and coverage and is ideal for healthy patients, negatively impacts a company since the low bronze premiums will increase the amount of money they must pay into the risk adjustment fund.
In New Mexico, Blue Cross and Blue Shield of New Mexico received the most money from the risk adjustment fund in 2014, at almost $7.5 million.
"NMHC, the small issuer that has perfectly aligned with the goals and mandates of the ACA by developing a competitive, innovative, low cost business model, is thus perversely subsidizing the behemoth BCBSNM," reads the lawsuit. "...The flaws in CMS's formula penalize NMHC for offering low premium, high quality plans and reward its competitors, like market-dominating BCBSNM, for keeping their prices high — an absurd distortion of Congress's clear intent to create an affordable, competitive insurance marketplace."
NMHC remains on solid financial footing, with strong reserves, it said in a press release. But "continued application of the risk adjustment formula could potentially force NMHC to close within the next few years," it said in its lawsuit.
Some co-ops in other states have already shuttered, like Oregon's Health CO-OP.Maryland and Massachusetts-based co-ops have both filed lawsuits similar to the one filed by NMHC.
NMHC is asking for an injunction against the risk adjustment program while the methodology for enforcing the statute is revised, but Hickey says it's not asking to avoid the payments or get money back.
"We'll pay what we owe and we're not asking for money back," he says. "We're paying everything, it's just this program is so detrimental to the ACA. They need to fix this one part in order to keep the cost of care down and make it more affordable."
He says co-ops have been raising complaints about the risk adjustment methodology for a year now, but the government refuses to revise it.
"They acknowledge these errors exist, but they're not fixing them for at least a few years," he said.
He says he expects the case to get heard in the next year, but the ideal result would be a quick fix without the legal proceedings. "My hope is that CMS will come to their senses and fix it," Hickey says. "We'd be happy to talk to them."
According to the lawsuit, the co-op is being asked to pay $14.6 million into the risk adjustment fund this year for benefit year 2015.