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U.S. Appeals Court Reverses Lower Court’s Judgment on Risk Payments to Health Insurers

A U.S. appeals court supported the validity of a federal program governing the payment of billions of dollars to insurers following the Affordable Care Act (ACA), shifting a lower court ruling that had prompted the White House to suspend funds temporarily.

Tuesday’s 3-0 decision by the 10th U.S. Circuit Court of Appeals in Denver is a triumph for insurers that feared the February 2018 lower court ruling, and funds suspension might drive up premium prices and trigger market disturbance.

The appeals court said the Division of Health & Human Services didn’t act arbitrarily and capriciously in implementing its “risk adjustment” funds program.

That program is intended to create incentives for insurers to cover sicker sufferers, including those with pre-existing situations, by paying them with money collected from insurers that enroll healthier sufferers.

Circuit Judge Scott Matheson stated HHS acted reasonably in utilizing a formula that relied on the “statewide average premium,” or the average of applicable premiums that insureds pay health insurers in a state, to calculate collections from or payments to insurers.

He stated HHS justified its approach over alternate options akin to utilizing the plans’ own premiums, which it feared may prevent high-risk plans to lower costs, to make the system “budget-impartial,” where overall charges would equal total funds.

Tuesday’s judgment reversed a ruling by U.S. District Judge James Browning in Albuquerque, New Mexico, that had put aside payment guidelines for 2014 by 2018.

The case had been introduced by New Mexico Health Connections, which had stated the rules had been inclined to favor giant insurers over “smaller rivals” such as itself.

Attorneys for the insurer didn’t instantly reply to requests for comment.

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