News & Politics

Administration Suspends Billions in Payoffs to Obamacare Insurers

The Trump administration has suspended more than $10 billion in Obamacare payments to insurance companies that lost money on state insurance exchanges. The money comes from insurance companies that actually made money selling insurance policies to younger, healthier consumers, and is collected by the government to be given to companies that were forced to insure older, sicker Americans.

This risk adjustment program was designed to “stabilize” the insurance markets by making sure that there were several companies in each market vying for customers, thus theoretically keeping premiums reasonable. Even with these payments, however, companies were fleeing the state exchanges, leaving few options for consumers and resulting in skyrocketing premiums.


The Centers for Medicare and Medicaid Services, which administers programs under the Affordable Care Act, said the action affects $10.4 billion in risk adjustment payments.

President Donald Trump’s administration has used its regulatory powers to undermine Obamacare after the Republican-controlled Congress last year failed to repeal and replace the law. About 20 million Americans have received health insurance coverage through the program.

The payments are intended to help stabilize health insurance markets by compensating insurers that had sicker, more expensive enrollees in 2017. The government collects the money from health insurers with relatively healthy enrollees, who cost less to insure.

CMS, which is overseen by the U.S. Department of Health and Human Services, said the move was necessary because of a February ruling by a federal court in New Mexico, which found that the federal government was using an inaccurate formula for allocating the payments.

“We were disappointed by the court’s recent ruling. As a result of this litigation, billions of dollars in risk adjustment payments and collections are now on hold,” CMS Administrator Seema Verma said in a statement.

A federal court in Massachusetts upheld the same allocation formula in January.

The CMS statement said the agency has asked the New Mexico court to reconsider its decision and expressed hope for a prompt resolution of the issue.

It hardly matters that no tax money is used in these payments, the concept was flawed from the start. Paying off companies that lose money was supposed to be a temporary adjustment to changing markets. Instead, it has become a crutch for companies that can’t make money on the exchanges to lean on. Obamacare’s mandated coverage of many items that most people don’t need is the real problem. It raises the cost of insurance for healthy, younger consumers, keeping them off the Obamacare exchanges and forcing insurance companies to provide coverage to too many older, sicker Americans.

As the number of companies offering insurance on the exchanges dwindles — even with the risk adjustment program payments — the efficacy of this program should be thoroughly examined.