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November 11, 2016 at 12:24 PM
A new court ruling could force health insurers that do business with U.S. Department of Health and Human Services programs to check to see whether the agreements they have made with HHS are actually contracts.
Judge Charles Lettow, a judge at the U.S Court of Federal Claims, ruled Thursday that the HHS Affordable Care Act public exchange plan issuer agreements describe how HHS thought the ACA risk corridors program would work but are not binding contracts.
HHS officials, and the laws and rules governing the ACA risk corridors program, have not provided any express or explicit intent on behalf of the government to enter into contracts with the exchange plan issuers, Lettow writes in an opinion explaining his ruling.
Lettow issued the ruling in connection with Land of Lincoln Mutual Health Insurance Co. v. United States of America (Case Number 16-744C).
Land of Lincoln Mutual, which was based in Chicago, was a nonprofit, member-owned insurer created with loans from the ACA Consumer Operated and Oriented Plan program. The Illinois Department of Insurance began liquidating it in September.
Managers and Illinois officials say the insurer failed partly because the ACA risk corridors program ended up paying ACA exchange plan issuers less than 13 percent of what the ACA and HHS officials told the program would send money-losing ACA exchange plan issuers to help with 2014 losses.
Other carriers, including Pittsburgh-based Highmark have filed similar suits seeking risk corridor payments. Highmark claims the U.S. government only paid about $27 million of the $223 million it was owed in risk-corridor payments for 2014.
Related: Health insurers vs. USA: 3 things agents have to know
Drafters of the ACA created the public exchange system in an effort to help consumers shop for coverage on an apples-to-apples basis, to create a vehicle for distributing exchange plan premium tax credit subsidies, and to help make the tough ACA restrictions on medical underwriting practical, by increasing overall health insurance enrollment enough to make up for letting people with cancer and diabetes buy health coverage at standard prices.
The ACA drafters created the ACA risk corridors program in an effort to help ease insurers into participating in the new exchange system, by offering to use cash from issuers that did well on the exchange system in 2014, 2015 and 2016 to help issuers that did poorly during those years.
Exchange user fees
HHS officials said up until September 2015 that the ACA risk corridors program would take in enough money from thriving exchange plan issuers to make good on its 2014 obligations. Officials announced Oct. 1 that the program had actually taken in far too little cash to pay more than a small fraction of the 2014 obligations in 2015 or 2016.
