CMS said that the amount frozen for the 2017 benefit year is $10.4 billion, which is drawn from insurers to go to other insurers.
The announcement came as insurers were awaiting an annual report that usually comes at the end of June, informing them of whether they owe money into the risk adjustment program or will be paid out for the previous year. "It will undermine Americans' access to affordable coverage, particularly those who need medical care the most".
Without the funds, insurance companies insuring a large number of sick clients may be forced to raise premiums on all clients. The CMS has appealed the decision, particularly because a MA court upheld such payments.
President Donald Trump's administration has used its regulatory powers to undermine Obamacare after the Republican-controlled Congress a year ago failed to repeal and replace the law. "In light of this analysis, the Government can not lawfully make the cost-sharing reduction payments", the White House said after ending the payments in October 2017. The Trump administration claims it is obligated to suspend these payments because of a court ruling out of New Mexico questioning their legality, but there is reason to be skeptical.
The administration "has asked the court to reconsider its ruling, and hopes for a prompt resolution that allows (the government) to prevent more adverse impacts on Americans who receive their insurance in the individual and small group markets", she said.
The agency said it had no choice after a U.S. District Court in New Mexico said the payments are invalid, due to the formula used to make them.
"We were disappointed by the court's recent ruling", Seema Verma, administrator for the Centers for Medicare and Medicaid Services (CMS), which administers the program, told The Wall Street Journal in a statement.
The Blue Cross Blue Shield Association, a federation of 36 Blue Cross and Blue Shield companies nationwide, also expressed disapproval at the move, saying it could create "turmoil" in the market.
America's Health Insurance Plans, the main health insurance industry trade group, said in a statement that it is "very discouraged" by the Trump administration's decision to freeze payments. These include eliminating the individual mandate penalty and broadening the availability of two alternatives to Affordable Care Act policies. The insurers have requested average rate increases for 2019 that range from 18.5 percent to 91.4 percent, depending on the type of plan.
"It has caused insurer collapses and market exits that reduced competition".