NM health co-op challenges new Obamacare risk payments

ALBUQUERQUE, N.M. — New Mexico Health Connections is continuing its legal battle against the federal government over millions of dollars it owes under the Affordable Care Act.

The health insurance co-op filed suit Monday in U.S. District Court in Albuquerque seeking to block an emergency rule the federal Centers for Medicare & Medicaid Services adopted that would require Health Connections to pay a net sum of about $5.6 million. It argues that the rule, to take effect on Oct. 22, was adopted in a rush and did not follow a legal requirement to solicit public comment first.

Health Connections since 2016 has been fighting the so-called risk adjustment program, which transfers payments from insurers with healthier patients to those with sicker clientele within the individual and small group markets. The co-op has argued that the methodology for calculting the risk payments was flawed.

Health Connections won a victory earlier this year when U.S. District Judge James O. Browning agreed with its argument and vacated the rule requiring risk adjustment payments.

CMS responded several months later by suspending the payments, but it then reinstated the requirement with the new emergency rule. That is the action Health Connections is now challenging.

Its request for summary judgment notes that three courts around the country have struck down other CMS regulations for similarly denying the public’s right to notice and comment on proposed rules.

“We contend that the emergency regulation continues a risk adjustment formula that disadvantages small, new, and lower-priced health plans in favor of their larger, more expensive competitors,” Marlene C. Baca, Health Connections CEO, said in a written statement.

The formula “penalizes any type of plan that is trying to be innovative,” Baca said in an interview. “If we have improved medical management or health outcomes, that should then lower premiums. Instead, the formula really hurts the consumers we serve … because it is so unpredictable and because it does inflate the members’ premuim.”

Health Connections is one of four co-ops remaining out of the 23 created by the Affordable Care Act. A 2016 congressional report found that risk penalties were one of several factors that led to the demise of many of the co-ops.

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