Judge Rejects North Carolina Blue's $130M ACA Program Claim

Grigsby says HHS has no obligation to make full risk corridors payments on an annual basis

(Photo: Diego M. Radzinschi/ALM) (Photo: Diego M. Radzinschi/ALM)

A federal judge dealt a major blow to a health insurer's attempt to recoup millions of dollars it says it is owed under an Affordable Care Act program designed to incentivize insurer participation in the ACA public exchange program.

Judge Lydia Kay Griggsby of the U.S. Court of Federal Claims in Washington, on Tuesday rejected a lawsuit brought last June by Blue Cross and Blue Shield of North Carolina. The company had accused the U.S. Department of Health and Human Services of failing to make good on its obligation to pay nearly $130 million under the ACA risk corridors program.

(Related: Judge Certifies ACA Risk Corridors Class Action Notice)

The opinion further widens the divide among Claims Court rulings addressing the issue of the federal government's nonpayment of risk corridor funds.

North Carolina Blue did not answer emailed requests for comment on the ruling Wednesday afternoon.

The ACA risk corridor program was established during the Obama administration to ease insurers — worried about potential losses they might suffer from insuring previously uninsured Americans — into selling coverage through the exchange system. The idea was to use money from insurers that did well on the exchanges in 2014, 2015 and 2016 to help insurers that did poorly.

In October 2015, HHS officials announced that the program had taken in only enough cash from exchange plan insurers that did well in 2014 and 2015 to pay about 16% of the amounts owed to the struggling insurers for 2014. The program has not paid anything to struggling insurers for 2015.

Griggsby agreed with HHS regulators that neither the ACA nor the regulations implementing the government's obligation to make risk corridor payments under the statute requires HHS to make full risk corridor payments on an annual basis.

ACA provisions demonstrate that the statute "neither addresses, nor establishes, a deadline for the payment of the Risk Corridors Program payments," the judge wrote. "And so, this statute is silent and, thus, ambiguous with respect to the timing of the Risk Corridors Program payments."

Judge Charles Lettow of the Claims Court last November dismissed on similar grounds a lawsuit brought by Land of Lincoln Mutual, a nonprofit, member-owned health insurer based in Chicago that claimed it was forced to shut down because of the government's nonpayment of risk corridor funds. That case currently is on appeal before the U.S. Court of Appeals for the Federal Circuit.

Other health insurers, however, which filed similar suits seeking risk corridor payments have had better success than Land of Lincoln Mutual and North Carolina Blue in the Federal Claims Court.

In January, Judge Margaret Sweeney denied the government's motion to dismiss a $22 million claim brought by failed Oregon-based Health Republic Insurance Co., noting that Congress did intend to make annual risk corridor payments to eligible issuers.

And about a month later, Judge Thomas Wheeler granted partial summary judgment in favor of Portland, Oregon-based Moda Health Plan Inc. Wheeler said the federal courts have the authority to get the cash — in Moda Health's case almost $200 million — from the federal judgment fund, and ruled that Moda Health had an implied contract with the risk corridor program. In the Blue Cross case, Griggsby found that the court had subject-matter jurisdiction to entertain the claims, which she also ruled were ripe for adjudication, so the government's motion to dismiss on those grounds was denied. The judge granted its motion to dismiss for failure to state a claim.

Lawrence Sher of Reed Smith in Washington, D.C., was counsel of record for the plaintiff along with Kyle Bahr, of counsel and Conor Shaffer, of counsel from Reed Smith's Pittsburgh office.

Charles E. Cantor, L. Misha Preheat, Frances M. McLaughlin, Marc S. Sacks, Terrance A. Mebane, Kirk T. Manhart, Ruth A. Harvey, Chad A. Readler, represented the defendant, the U.S. government.

--- Read Republicans Offer Two ACA Risk Corridors Paths on ThinkAdvisor.

Originally published on National Law Journal. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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