"We are very discouraged by the new market disruption brought about by the decision to freeze risk adjustment payments", the group said in a statement Saturday. "It moves us back to some extent to the status quo where people with pre-existing conditions found it very hard to get insurance".
"This decision will have serious consequences for millions of consumers who get their coverage through small businesses or buy coverage on their own", America's Health Insurance Plans said.
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.
This is distinct from the debate over ObamaCare's cost-sharing payments, which the Trump Administration cut off previous year after a federal judge barred the subsidies that Congress had not appropriated.
The payments are meant to help stabilise health insurance markets by compensating insurers that had sicker, more expensive enrollees in 2017.
The Center for Medicare and Medicaid Services (CMS) has suspended payments to health insurers with a large number of sick Obamacare clients.More news: Duke and Duchess of Sussex arrive in Ireland for tour
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The announcement was made by Seema Verma, the administrator of the Centers for Medicare and Medicaid Services, and was precipitated by a New Mexico court ruling that suggested the calculations for the risk-adjusted premiums were flawed even despite a MA ruling that validated them.
In the MA case, however, a federal judge upheld the Obamacare formula, the Journal reports.
"As a result of this litigation, billions of dollars in risk adjustment payments and collections are now on hold", CMS Administrator Seema Verma said in the agency's statement. "It enables the country to move away from a market where plans compete to avoid covering or charge more to people with preexisting health conditions, to one where competition is based on quality, affordable care for everyone".
Navigators applying for funding will also be encouraged to show how they will educate people about the newly expanded alternatives to Obamacare, such as association health plans and short-term plans.
"The federal government's decision to suspend payment transfers under the ACA's risk adjustment program could have a significant impact on premiums and place an additional burden on people in the community who can least afford it", CareFirst's president and CEO, Brian Pieninck, said in a statement.
Since Congress was unable to pass such a law, Trump and his aides have been taking a series of steps to weaken the law through administration maneuvers. Last year, the administration halted important subsidies for insurers. 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.