Tenth Circuit Reverses District Court And Upholds ACA's Statewide Average Premium Risk Adjustment Methodology

In a unanimous decision, the United States Court of Appeals for the Tenth Circuit reversed a district court decision holding that HHS' use of the statewide premium average to calculate Affordable Care Act (ACA) risk adjustment charges and payments from 2014 to 2018 was arbitrary and capricious. See N.M. Health Connections v. U.S. Dep't of Health & Human Servs., Case No. 18-2186, 2019 U.S. App. LEXIS 38739 (10th Cir. Dec. 31, 2019). New Mexico Health Connections (NMHC) filed the original lawsuit claiming that the ACA risk adjustment methodology adopted by HHS unfairly penalized smaller insurers. The district court agreed and held that HHS failed to sufficiently explain its decision to use the statewide average premium versus other alternatives in the ACA risk adjustment program. In addition, the district court had held that HHS erroneously interpreted the ACA's risk adjustment provision to require budget neutrality and that budget neutrality was a policy goal for the