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Health insurers vs. USA: 3 things agents have to know

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Blue Cross and Blue Shield of North Carolina and Moda Health Plan have joined the list of health insurers suing the United States of America over the U.S. government’s failure to make public exchange plan risk corridors program payments to insurers. 

See also: Why Highmark’s $223 million PPACA suit matters to agents

Both insurers have filed their suits in the U.S. Court of Federal Claims.

Moda Health is seeking $180 million in Patient Protection and Affordable Care Act (PPACA) risk corridors program payments.

North Carolina Blue is seeking $147.5 million in payments.

Health Republic Insurance Company of Oregon was the first carrier to sue the USA over the USA’s PPACA risk corridors payment programs. Health Republic said it was owed a total of $22.1 million in risk corridors program money for 2014 and 2015, and it sued for about $5 billion in payments on behalf of all affected insurers.

Highmark, a big Blue Cross and Blue Shield carrier in Pennsylvania, sued for $223 million in May.

The United States has not yet file a response to either company’s complaint. Charles Canter, the lawyer representing the USA in the Health Republic case, is supposed to file an answer on behalf of the USA in that case by June 24.

The risk corridors program was supposed to give insurers the confidence to participate in the PPACA public exchange program and hold rates down, in spite of major new underwriting rules and benefits requirements. PPACA calls for the U.S. Department of Health and Human Services (HHS) to run the program by drawing cash from PPACA public exchange plan issuers that did well in 2014, 2015 and 2016, and using the cash to help exchange plan issuers that did poorly in those years.

Congress later prohibited HHS from using taxpayer money or any funds other than program user fee revenue to make program payments.

Kevin Counihan, the director of the HHS Center for Consumer Information & Insurance Oversight (CCIIO) and the head of the PPACA public exchange program, said in July 2015 that state regulators should assume the PPACA risk corridors program would be able to make good on payment obligations for 2014 and 2015.

In October, CCIIO announced that it would collect only enough revenue to pay about 13 percent of 2014 risk corridors program claims. 

See also: Feds: PPACA risk program may pay just 13% of 2014 claims

The cases could impact health insurance agents and brokers by affecting how interested insurers are in selling coverage through the PPACA exchange system and what the coverage will cost.

The cases could also affect insurers’ interest in selling Medicare Advantage plans, Medicare Part D prescription drug plans, managed Medicaid plans and other plans set up in such a way that insurers are depending on federal agencies to make payments after services have been provided.

For a look at key details from the new risk corridors suit pleadings, read on. 

U.S. Capitol


1. A top HHS lawyer assured North Carolina Blue in May 2014 that HHS had approval from Congress to pay risk corridors program bills.

North Carolina Blue has included a document showing why it depended on the performance of the PPACA risk corridors program in an exhibit submitted along with its complaint.

In a letter dated May 20, 2014, William Schultz, who was then the HHS general counsel, told North Carolina Blue that HHS had the authority to make corridors program payments through 2019, under Section 1342 of PPACA, and under the Consolidated Appropriations Act, 2014.

In the letter included in the packet, Schultz says the appropriation lets HHS spend risk corridors program revenue on program payments. Schultz and North Carolina Blue do not appear to discuss what would happen if the program collected less user fee revenue than needed to make the payments.

See also: N.C. Blue may take $400 million individual policy hit

U.S. Constitution

2. North Carolina Blue lists five reasons the courts should help it.

North Carolina Blue says the U.S. failure to make risk corridors program payments violates federal laws and regulations.

“Congress’s failure to appropriate sufficient funds … did not defeat or otherwise abrogate the United States’ statutory obligations created by Section 1342 to make full and timely risk corridor payments,” the company says.

The company is also accusing the USA of breach of express contract, breach of implied-in-fact contract, breach of implied covenant of good faith and fair dealing, and taking without just compensation in violation of the Fifth Amendment of the U.S. Constitution.

See also: UnitedHealth quitting PPACA exchange programs in Georgia, Arkansas 

Andy Slavitt


3. Moda Health lists just two reasons the courts should help it.

Moda Health, a regional insurer based in Portland, Ore., notes that the risk corridors program payment problems have forced it to pull out of Alaska.

That has left Alaska with no competition in its individual health insurance market, the company says.

Moda Health lists two counts in its claim for relief.

One is that the USA violated statutory mandates and statutory authority, and another is that the USA breached an implied-in-fact contract.

Kevin Counihan and Andrew Slavitt, the current acting administrator of the Centers for Medicare & Medicaid Services (CMS), the HHS agency directly in charge of CCIIO, all have, or had, the authority to bind the government, and they said the government would make risk corridors program payments, Moda Health says.

“The mere failure of Congress to appropriate funds does not defeat the government’s contractual obligations,” the company says.

See also:

Moda Health keeps going

PPACA risk corridors gap rocks more carriers


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Image: Andy Slavitt (House Energy and Commerce Committee hearing video screen capture)