Two recently filed lawsuits illustrate continuing difficulties the administration faces in implementing the Affordable Care Act, particularly under the constraints imposed upon it recently by Congress. Specifically, the suits illustrate the legal difficulties for the administration created by Congress' limiting of "risk corridor" payments—made to insurers with high claims costs—to amounts contributed to the risk corridor program by insurers with low costs. Last year, CMS announced that it would have only $362 million in contributions to pay out $2.87 billion in requested payments, and so would only pay out 12.6 cents on the dollar for payment claims.
The first lawsuit was filed by Iowa Insurance Commissioner Nick Gerhart on May 3. Gerhart is responsible for managing the insolvency of Co-Opportunity, Iowa's failed health insurance CO-OP, and thus for ensuring that its enrollees claims are paid. The federal government is a creditor of Co-Opportunity, having loaned it about $15 million in start-up loans and $130 million in solvency loans. These loans are explicitly subordinate to payments owed for enrollee claims.
The lawsuit alleges that the federal government currently owes Co-Opportunity over $22 million in reinsurance, risk adjustment, and risk corridor payments, as to which it currently admits liability. Beyond these admitted debts, the federal government owes Co-Opportunity $113.6 million in risk corridor payments which it is unable to pay because they exceed the amount that can be collected from insurers that owed money to the program. If all of these risk corridor funds were available, the complaint alleges, Co-Opportunity could cover the claims of its participants and repay much of the debt it owes the federal government.
The administration has, however, placed an administrative hold on the money it owes Co-Opportunity and is considering using these funds to set-off debts owed by Co-Opportunity. Commissioner Gerhart's lawsuit claims that the administrative hold and proposed netting of payments the federal government owes Co-Opportunity against the debts it owes the federal government violate Iowa insolvency and federal law, including the express subordination agreements. It asks the court to ensure that the funds owed by the federal government to Co-Opporunity are released and promptly paid.
The second lawsuit, brought by Highmark Health Insurance Company and several related health plans, challenges the failure of the United States to pay $195 million of the $223 million owed to the companies under the risk corridor program for 2014. As with Co-Opportunity, the government was only able to pay out 12.6 percent of the money due Highmark under the statutory risk corridor formula because of Congress' limitation on payments under the program. The Highmark lawsuit claims that the administration has violated the risk corridor statute and regulations, as well is its contracts with Highmark, by failing to pay the full risk corridor amount. The Highmark lawsuit raises the same issues p a failed CO-OP, earlier this year.
from Health Affairs BlogHealth Affairs Blog http://ift.tt/1OLCttL
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