Judge backs health insurer in ACA payment suit

A U.S. Court of Federal Claims judge today backed efforts by Moda Health Plan Inc. to collect about $200 million in Affordable Care Act risk corridors program payments from the United States of America.

Judge Thomas Wheeler granted partial summary judgment in favor of the Portland, Oregon-based insurer. He said the federal courts have the authority to get the cash for the risk corridors program payments from the federal Judgment Fund.

Wheeler ruled that Moda Health has an implied-in-fact contract with the risk corridors program. He blasted the idea that the government has the right to refuse to make the risk corridors program payments because Congress changed program funding rules a year after the program managers had already described the terms of the arrangement to participating insurers.

“After all, to say to [Moda], ‘The joke is on you. You shouldn’t have trusted us,’ is hardly worthy of our great government,” Wheeler writes in an opinion on the ruling.

Risk corridors program

The ACA made sweeping changes to commercial health insurance requirements, and it started the ACA public exchange system, a web-based health insurance supermarket.

The ACA risk corridors program was supposed to encourage health insurers to sell health coverage through the ACA public exchange system. The program was supposed to use cash from thriving issuers and, possibly, other sources, to help struggling issuers.

Republicans in Congress later put provisions in must-pass budget bills that limited the U.S. Department of Health and Human Services from using any funds other than payments from thriving exchange plan issuers to pay the struggling the issuers.

The program was supposed to be in effect for 2014, 2015 and 2016.

The program has collected only enough cash to pay about 15 percent of the amounts owed for 2014. Program managers have not tried to make payments for 2015 or 2016.

Many insurers in addition to Moda Health have filed risk corridors program payment suits with the Federal Claims Court.

Lawyers at the U.S. Department of Justice have argued, on behalf of the U.S. government, that the program payments were due only after 2016, not on an annual basis; that Congress intended for the program to be self-funding; and that HHS lacked the ability to bind the U.S. government to make the program payments.

In November, one judge at the court rejected a risk corridors program suit filed by Chicago-based Land of Lincoln Mutual Health Insurance Company. That judge argued that insurers had no contractual relationship with the risk corridors program.

In January, a third judge at the court blocked some claims and allowed others in connection with a risk corridors program suit filed by Lake Oswego, Oregon-based Health Republic Insurance Company. That judge ruled that she did not believe she could give the insurer immediate relief, but that she believed she could review the insurer’s claim for risk corridors program payments.

Louisville, Kentucky-based Humana Inc. reported Wednesday that it was writing off $583 million in risk corridors program receivables because of concerns about the effect of the Land of Lincoln Mutual ruling on how likely it would be to collect on the receivables.

Wheeler ruling details

Wheeler, who was appointed to the Federal Claims Court in 2005, by President George W. Bush, ruled that the statute restricting the ability of HHS to make risk corridors program payments affects only HHS funds, not access to the federal Judgment Fund.

The Judgment Fund Branch, an arm of the U.S. Treasury Department, pays parties that win court judgments against the U.S. government.

The risk corridors program funding restriction provision was not clear enough or broad enough to cut off access to the Judgment Fund, Wheeler said.

“As a result, there is no genuine dispute that the government is liable to Moda,” Wheeler concluded.

Wheeler told the parties to tell him how they intend to proceed by March 1.

Moda Health filed its suit against the United States in June, while Barack Obama was president. Justice Department lawyers participated in their last recorded work on the Moda Health case, at oral arguments before Wheeler, Jan. 13, when Obama was still in office.

Justice Department representatives declined to comment on the risk corridors program litigation.

Steven Rosenbaum of the Washington office of Covington & Burling LLP is the lead attorney for Moda Health.

Phillip Seligman of the Justice Department Civil Division is the lead attorney for the United States.