ACA funding freeze adds uncertainty for Pa. marketplace

The U.S. Health and Human Services department has put a freeze on $10.4 billion in funding that was expected to go to Affordable Care Act insurers later this year, raising questions about the future of the exchange in Pennsylvania and elsewhere.

HHS has said the freeze is one result of an ongoing legal battle between an insurer in New Mexico and the federal government. However the move has left many analysts wondering whether it signals another effort to dismantle the individual market that was one of President Barack Obama’s signature actions and that President Donald Trump has vowed to repeal and replace.

The funds, which are known as the ACA’s “risk adjustment program,” play a key role in balancing the insurance marketplace across various regions, said State Insurance Commissioner Jessica Altman.

The freeze is already disrupting the commonwealth’s marketplace and leaving insurers wondering when they’ll get paid, Altman said.

“There are some carriers who are due payments that for now will not receive them, and there are other carriers in Pennsylvania that owe payments and that as of now do not have to formally pay them during this freeze,” Altman said.

The larger question is what will happen if the funding doesn’t resume, Altman said. Pennsylvania’s ACA marketplace has stabilized after several years of double-digit premium increases, she noted, with rates set to increase a modest 4.9 percent for 2019. Funding cuts could drive up costs or cause insurers to pull out of the exchange.

Officials for Highmark Health, which is on the ACA exchange in Pennsylvania, released a statement saying they’re “disheartened” that the New Mexico U.S. District Court decision would be applied across the nation. Highmark officials noted that the risk adjustment program doesn’t use taxpayer money, but rather, transfer payments between various insurers.

“The program has worked effectively to help balance the cost of caring for those with significant health needs by ensuring that health plans are able to enroll all consumers, regardless of their health status,” the news release states. “Because of this balancing of risk, insurers are incented to compete on the effectiveness of their offerings, not simply targeting and enrolling only the healthiest of individuals.”

“Unless the current course changes, this action by the administration will most likely have an impact on rates for 2019 and some carriers may choose to leave the market,” Highmark said. “We will need to work collaboratively with insurance departments where we do business to address this issue.”

Altman said the insurance department will continue to monitor the situation.

“This is an absolutely critical program,” she said, “and if something were to put the existence and the ongoing existence of the program in jeopardy, we would have really serious concerns.”