This is Insurance Economics 101, and the concept is not particularly controversial. Yet some smaller players in Obamacare markets objected to the way the federal government implemented the program, complaining that the formulas made them pay too much. A federal judge in Boston rebuffed the complaints. But another federal judge in New Mexico ruled CMS had not provided adequate justification for one element of the system’s design, and enjoined the collection and distribution of risk-adjustment funds. This unreasonable ruling is unlikely to stand. Yet CMS insisted it was left with no choice but to halt risk-adjustment payments nationwide.
This is false. It took legal experts such as the University of Michigan’s Nicholas Bagley no time to point out that the administration could have immediately filed an appeal and sought a stay of the ruling in the meantime. Or the administration could have quickly introduced an interim final rule addressing the judge’s criticisms that would have applied immediately. Or the administration could have halted payments only in New Mexico. It chose instead to cause maximum disruption.
Fortunately, the disruption should be temporary. Next year’s risk-adjustment rules provide the justifications for the system’s design that the New Mexico judge complained previous iterations did not, so they will be more resistant to legal challenge. Yet that will not change the damage occurring now. The administration still appears poised to punish insurers by withholding billions in funds they reasonably expected to receive — and for nothing more than partnering in good faith with the federal government to provide health insurance to vulnerable people.
As when the Trump administration declined to defend Obamcare’s insurance regulations in court, this is another case of the president and his team shirking their governing responsibilities. CMS officials should end the disruption immediately.