The Affordable Care Act risk corridor program requires the Department of Health and Human Services to collect funds from excessively profitable insurers that offer qualified health plans (QHPs) through the marketplaces while paying out funds to QHP insurers that have excessive losses. Although the statute does not explicitly state that the amount paid to insurers cannot exceed the amount collected, Congress passed appropriations riders imposing such a requirement for 2014 and again for 2015.
Collections from profitable insurers under the program of $362 million in 2014 fell far short of payment of $2.87 billion owed to insurers with excessive losses. HHS was only able to pay out 12.6 cents on the dollar in risk corridor payments for 2014.
A half dozen insurers sued HHS in the Court of Claims asserting a right to full payment of risk corridor obligations for 2014. In its brief filed in June in the first of these cases—the Health Republic case—the Department of Justice (DOJ), representing HHS, took the position that the lawsuit should be dismissed as premature because the full amount owing under the program would not be due until the program ran its course in 2016. The DOJ did not address the merits of the insurer's argument that the statute imposed an ultimate obligation on HHS to pay the full amount owed insurers under the statutory formula.
On September 8, HHS announced that it would not be collecting enough money from QHP insurers to cover any 2015 obligations under the risk corridor program, but would have to devote all 2015 collections toward 2014 obligations. It went on to say, however:
As we have said previously, in the event of a shortfall for the 2016 benefit year, HHS will explore other sources of funding for risk corridors payments, subject to the availability of appropriations. This includes working with Congress on the necessary funding for outstanding risk corridors payments. HHS recognizes that the Affordable Care Act requires the Secretary to make full payments to issuers. HHS will record risk corridors payments due as an obligation of the United States Government for which full payment is required.
The HHS bulletin went on to say that the Department of Justice was "vigorously defending' the lawsuits by insurers claiming risk corridor payments, but also that, "as in all cases where there is litigation risk, we are open to discussing resolution of those claims. We are willing to begin such discussions at any time." This statement brought forth a storm of criticism from Republican members of Congress, who held a hearing on the issue and sent a number of letters to HHS Secretary Burwell expressing concern that HHS might be attempting to circumvent the limits Congress had placed on appropriations by settling the cases using money from the judgment fund, which funds judgments and settlements in Court of Claims cases.
On September 30, the DOJ filed motions to dismiss in separate risk corridor cases brought by Blue Cross and Blue Shield of North Carolina and the Moda Health Plan. The memoranda in support of these motions raise the same arguments as to prematurity raised in the Health Republic case. But the memoranda go well beyond the brief filed in that case, rejecting all of the arguments raised by the health plans in their complaints. The September 30 briefs argue that the risk corridor statute only entitled QHP insurers to payments equal to the amounts collected. Even if this limitation was not clear from the outset, the 2015 and 2016 appropriations riders in effect amended the statute to impose it.
Furthermore, the DOJ brief argues, HHS has no contractual obligations, express or implied, to make risk corridor payments—the contracts it has with QHP insurers do not address the risk corridor issue. To the extent that HHS officials might have said that HHS owed the money, those statements are not binding on the government. Finally, the North Carolina brief additionally rejects an argument raised by the complaint in that case that the failure to pay is an unconstitutional taking. DOJ contends that plaintiff did not have a property interest that could have been taken by the government and thus no taking could occur.
In sum, the DOJ is in fact "vigorously defending" HHS against the insurer's lawsuits. This could, of course, be a strategic move to encourage a favorable settlement. It could also mean, however, that the administration has concluded that the political cost of making full risk corridor payments to insurers (some of which have already gone out of business in any event, in part because of the 2014 risk corridor shortfall) would be higher than the cost of refusing to settle. Time will tell.
Judgment Voids Requirement That Purchasers Of Fixed Indemnity Coverage Attest To Having Minimum Essential Coverage
In another case, on September 19, 2016, HHS agreed to the entry of a final judgment in Central United Life Insurance Co. v. Burwell declaring the HHS regulation governing fixed indemnity insurance plans invalid and unenforceable insofar as it required individuals who purchase fixed indemnity coverage to attest that they had other coverage that qualified as minimum essential coverage under the ACA. Both the district and appellate court had ruled against HHS on this issue.
The agreed order has no effect on the other requirements of the HHS fixed indemnity plan rule. Under that rule, fixed indemnity "excepted benefits" coverage is only exempt from ACA requirements that apply to health insurance coverage, if:
- there is no coordination between the provision of benefits and an exclusion of benefits under any other health coverage;
- the benefits are paid in a fixed dollar amount per period of hospitalization or illness and/or per service (for example, $100/day or $50/visit) regardless of the amount of expenses incurred and without regard to the amount of benefits provided with respect to the event or service under any other health coverage; and
- a notice is displayed prominently in the application materials in at least 14 point type that has the following language: "THIS IS A SUPPLEMENT TO HEALTH INSURANCE AND IS NOT A SUBSTITUTE FOR MAJOR MEDICAL COVERAGE. LACK OF MAJOR MEDICAL COVERAGE (OR OTHER MINIMUM ESSENTIAL COVERAGE) MAY RESULT IN AN ADDITIONAL PAYMENT WITH YOUR TAXES."
The order also has no necessary effect on regulations that have been proposed by HHS to regulate other forms of excepted benefit health coverage, such as short-term coverage or group fixed indemnity coverage. These regulations do not require purchasers to have other minimum essential coverage, the requirement invalidated in Central United.
There are reasons for continued concern about fixed indemnity coverage. Fixed indemnity coverage usually offers very limited coverage. Insurers offering fixed indemnity coverage can underwrite applicants based on health status and exclude preexisting conditions or essential benefits such as mental health coverage. Individuals who purchase only fixed indemnity coverage must pay the individual responsibility penalty. Although consumers purchasing fixed indemnity coverage must be warned that it is not minimum essential coverage, it is likely that some consumers will purchase it not understanding how little it covers or that they still need to pay the penalty.
Finally, when healthy people opt for excepted benefit coverage rather than comprehensive coverage, this undermines further the stability of the market for comprehensive coverage and drives up premiums for everyone else. But the appellate court concluded that HHS lacked the authority to require fixed indemnity coverage to supplement ACA-complaint coverage, and HHS has accepted that ruling.
from Health Affairs BlogHealth Affairs Blog http://ift.tt/2d08Awr
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