Health Affairs January 1, 2020
Katie Keith

On December 31, 2019, a three-judge panel of the Tenth Circuit Court of Appeals upheld the methodology adopted by the Department of Health and Human Services (HHS) to administer the risk adjustment program under the Affordable Care Act (ACA). A district court in New Mexico had previously concluded that part of the methodology—the use of statewide average premiums—was arbitrary and capricious. The district court struck down this part of the formula for the years from 2014 to 2018 until HHS could justify its rationale for adopting a budget-neutral risk adjustment program. This decision led to the temporary suspension of about $10.4 billion in risk adjustment payments in summer 2018.

The Tenth Circuit disagreed with the district court’s determination, concluding that HHS’ use of the statewide average premium...