Last week was eventful for Molina Healthcare Inc. On Friday, a federal judge ruled that the insurer is owed more than $52 million under the Affordable Care Act risk corridors program meant to incentivize insurer participation in the public exchanges.
Just two days before, however, the company announced that it will exit the marketplaces in Utah and Wisconsin by year’s end. It experienced losses of $230 million in the second quarter. It’s a long way from the same Long Beach, California-based insurer that in 2014, its first year of selling ACA plans, doubled its revenue to $12 billion. And it is not alone: Months before Molina began announcing its intent, insurance giants, including Aetna, Humana and UnitedHealth, began exiting the marketplaces, saying they are unable to turn a profit on the individual plans they sell on the state and federally run exchanges.
From two failed legislative attempts to reform health care to litigation over various ACA provisions, the health care industry faces increasing uncertainty. Although Molina notched a win last week with its victory in the risk-corridor lawsuit, a remaining claim against the government in its case means it is among more than two dozen insurers continuing to wind their way through the U.S. Court of Federal Claims.
More than two dozen health insurance companies, some of which already have failed, have sued the government over the last couple of years over its failure to make risk-corridor payments—money that Congress statutorily agreed to pay certain insurers if they signed up to sell policies under the ACA but did not explicitly appropriate in the statute.
Reed Smith represents Molina, as well as four other insurers, in the risk-corridor litigation. They are Blue Cross of Idaho, Blue Cross and Blue Shield of Kansas City, Blue Cross and Blue Shield of North Carolina and Highmark Inc. Partner Lawrence Sher, lead attorney on the cases, spoke with Corporate Counsel about how he and his firm became major players in the space, and what it’s like to help health care clients navigate these uncertain times. The interview has been edited for length and clarity.
Corporate Counsel: How did you come to represent the companies in these matters?
Lawrence Sher: In the fall of 2015, our clients were concerned they weren’t going to get paid the risk corridors due. They asked us to look at this, and we started analyzing: “Are these obligations enforceable? Where would they be enforceable? In what court would they be enforceable? Where is there jurisdiction? What would be the causes of action?”
The first action we filed was on behalf of Highmark, which is a big claim (nearly $233 million). So we developed a lot of expertise for a large insurer in developing case law for our first complaint, which really appears to have become the template from which many of these lawsuits have followed. Then from that first lawsuit, other clients saw our work and retained us to represent them, which led us to represent the five companies that have filed so far.
CC: Personally, what is it like to be part of such high-stakes, high-profile litigation?
LS: These cases present really fascinating issues that intersect health care law, government contracts and constitutional law. They also present some really interesting fundamental legal issues that go really to the core of our government: “How is the government bound? How are its obligations enforceable? Can the government be held to its statutory and contractual promises? Should the government be treated differently than a private entity? What is the expectation for companies that are invited and induced to participate in a government program like the health care exchanges created by the ACA?
(Photo: John Kroetch)
How are they to be treated when with one hand the government says, “Please create qualified health plans and offer insurance on these new uncertain exchanges and in exchange we shall pay you a certain amount if your losses exceed a target”? And, with the other hand the government subsequently decides to renege on that promise, will the courts step in and hold them to their obligations?