On July 24, 2018, the Centers for Medicare and Medicaid Services (CMS) issued an Interim Final Rule that provides additional explanation around the risk adjustment methodology used for qualified health plans (QHPs) offered in Exchanges established under the Affordable Care Act (ACA). CMS is issuing the interim final rule in response to a recent federal court decision; the rule is intended to satisfy an administrative requirement in order for CMS to move forward with risk adjustment collections and payments for the 2017 benefit year.
Importantly, the interim final rule does not make any changes to the previously published Department of Health and Human Services (HHS)-operated risk adjustment methodology for the 2017 benefit year. Instead, the rule provides an additional explanation of the rationale behind the use of statewide average premium and the budget-neutral approach that CMS used to implement the program.
Background on court case
In February 2018, the US District Court of New Mexico deemed CMS’ formula for determining risk adjustment payments from 2014 to 2018 as arbitrary and capricious and vacated the associated rules with the requirement that CMS provide further explanation into its choice to use a statewide average premium as the basis of the risk adjustment formula.
CMS filed a motion for reconsideration of the ruling. In a hearing on the motion, a judge indicated that a final ruling might not come until Labor Day.
The rule takes effect immediately, and allows risk adjustment payments from prior years to resume unabated. In the interim final rule, CMS said issuers would receive invoices for risk adjustment collections on or about September 11-13, 2018. Payments owed to issuers will begin to be made around October 22, 2018.
In addition, CMS announced that the plans to issue a Notice of Proposed Rulemaking to propose and solicit comment on the risk adjustment methodology for the 2018 benefit year, which also was vacated by the court.
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