The U.S. Department of Health and Human Services repeatedly told health insurers that it was legally required to make full Affordable Care Act risk corridors program payments, a group of nonprofit health insurers says.

The group, the Alliance of Community Health Plans, makes that argument in a legal brief about the ACA risk corridors program payment failure. The group filed the brief with the U.S. Court of Appeals for the Federal Circuit.

Related: 20 biggest new ACA risk corridors failure absorbers

In March 2014, when Kathleen Sebelius was the HHS secretary, HHS told insurers in a notice that, “The Risk Corridors program is not statutorily required to be budget neutral,” and “Regardless of the balance of payments and receipts, HHS will remit payments as required under section 1342 of the Affordable Care Act,” the ACHP says in the brief.

Later, in February 2015, when Sylvia Mathews Burwell was the HHS secretary, HHS told insurers in the introduction to an ACA regulation that, “HHS recognizes that the Affordable Care Act requires the secretary to make full payments to issuers,” the ACHP says.

The ACHP represents AvMed, Geisinger Health Plan, Kaiser Foundation Health Plan and other nonprofit health plans. The group filed the brief because it wants the appeals court to overturn a lower-court ruling on an ACA risk corridors payment collection suit, Land of Lincoln Mutual Health Insurance Company v. the United States of America.

Land of Lincoln Mutual, a Chicago-based health insurer that failed, sued the federal government in an effort to collect risk corridors program payments for 2014 and 2015.

The ACHP says the ACA risk corridors program payment failure has had a severe effect on its own member insurers’ ability to offer affordable health coverage.

The ACHP says the program payment failure:

        • Increased one small member’s premiums by 20 percent.

        • Forced another member to pull out of the ACA exchange system.

        • Led to “severe harm” at an insurer with operations in several states.

The risk corridors program was supposed to tempt insurers to enter a new and uncertain market, by protecting themselves against unexpected losses. Then, when the insurers did suffer unexpected losses, the government refused to make program payments, the ACHP says.

“This led to serious problems with cash flow, risk-based capital, and state-regulated reserve requirements,” the ACHP says.

President Donald Trump's administration has not yet weighed in on the ACA risk corridors program lawsuits. (Photo: White House)

President Donald Trump’s administration has not yet weighed in on the ACA risk corridors program lawsuits. (Photo: White House)

ACA risk corridors program

The ACA risk corridors program was supposed to help ACA exchange plan issuers cope with the confusion surrounding the launch of the ACA exchange system. The program was supposed to use cash from thriving issuers, and, possibly, other sources, to help exchange plan issuers that had problems in 2014, 2015 and 2016. The Medicare Part D prescription program has been using a similar program since 2003.

Republicans in Congress called the ACA risk corridors program a bailout for health insurers. For 2014 and 2015, Republicans succeeded at getting risk corridors program funding restrictions into budget measures that were signed into law. The risk corridors spending provisions forbid ACA risk corridors program managers from using any source of cash other than payments from thriving exchange plan issuers.

The risk corridors program managers have collected only enough cash to make about 15 percent of the 2014 program payments. They have not made any of the 2015 payments. Insurers say the program owes them a total of more than $8 billion for 2014 and 2015.

HHS has not yet calculated how much the program owes insurers for 2016.

Obama administration lawyers argued that the dispute is not yet ready for legal action, because HHS set up a three-year risk corridors program payment period. HHS will not be late with its program payments until after the due date for the payments for 2016, Obama administration lawyers said.

Trump administration lawyers have not been available for comment on the issue. They have not yet filed documents expressing their views on the situation in connection with the Land of Lincoln Mutual case or other risk corridors program lawsuits.

In the Land of Lincoln ruling, a judge found that insurers had no contractual relationship with the Affordable Care Act risk corridors program, and no legal right to collect risk corridors program payments.

Related:

ACA risk program may kill Molina exchange plans

Actuaries slam risk corridor proposal

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