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Crowell & Moring Says Feds Owe N.Y. Health Insurer More Than $38.7M

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A western New York health insurer has filed a lawsuit against the federal government arguing that it is owed more than $38.7 million under the Affordable Care Act risk corridors program, which was designed to encourage insurers to participate in the ACA public health exchanges.

HealthNow New York Inc., the parent company of BlueCross BlueShield of Western New York, filed a lawsuit in the U.S. Court of Federal Claims in Washington, D.C., on Aug. 11, arguing that the federal government was in “breach of its risk corridor payment obligation under an implied in-fact contract.”

(Related: Reed Smith’s Sher Talks About Molina’s $52 Million ACA Win and What’s Next)

A lawyer for the Buffalo-based insurer, Stephen McBrady of Crowell & Moring, argued in the lawsuit, HealthNow New York v. The United States of America, Number 17-1090C, that the Centers for Medicare & Medicaid Services concedes that it owes HealthNow $9.6 million under the risk corridor program for participating in the New York health exchange marketplace in 2015. The complaint alleges that CMS also owes an additional $29.1 million for participating in the state marketplace in 2016. According to the lawsuit, HealthNow provided insurance coverage to 56,000 people between 2014 and 2016.

The risk corridors program was established under the Affordable Care Act to quell the concerns insurers had about the possible financial losses they might incur from insuring those who were previously uninsured. The basic idea behind the program was to use money from insurers that did well on the exchanges to help insurers that did poorly. But a Republican Congress, led by Florida Sen. Marco Rubio, inserted a provision into a 2015 spending bill that prohibited the U.S. Department of Health & Human Services from making payments to the risk corridor program in excess of collections.

In October 2105, HHS announced that the risk corridor program only took in enough money from health exchange insurers that did well in 2014 and 2015 to pay roughly 16% of the amount owed to struggling insurers for 2014. The program did not pay out anything to struggling insurers the subsequent year.

The lawsuit by HealthNow, which did not respond to requests for comment, argues that the “government’s budget neutrality approach is not supported by law.”

HealthNow, which reported to the state Department of Financial Services an income of $4.2 million on revenue of $2.3 billion for 2016, said that withholding the risk corridor payments “defeats the very purpose of the risk corridor program: mitigation of risk and obligation that [qualified health plan] issuers like HealthNow are assuming by providing adequate and affordable health coverage to all Americans, as desired by the ACA.”

“Withholding the payments violates both the letter and spirit of the law,” the lawsuit further said.

With the federal government still on the hook for roughly $8.3 billion in risk corridor payments, dozens of health insurers have sued the federal government to try and recuperate some of those funds. Health insurance companies, some of which have since failed, have sued with varied degrees of success.

Earlier this month, a federal judge in Washington ruled that California-based Molina Healthcare Inc. is owed more than $52 million under the risk corridor program. Failed Chicago-based insurer Land of Lincoln Mutual Health Insurance Co. sued the government for more than $75 million in damages owed to them from the risk corridor program. Land of Lincoln Mutual Health Insurance’s claims were dismissed by a U.S. Court of Federal Claims judge in November, but the company has appealed the decision. A separate U.S. Court of Federal Claims judge in Washington rejected a lawsuit in April brought on by Blue Cross and Blue Shield of North Carolina seeking $130 million in payments from the risk corridor program.

The U.S. House of Representatives in May weighed in on the issue of the lack of funding for the risk corridor program, arguing that the government does not owe insurers funding.

The attorney representing HealthNow is also representing South Dakota-based insurer Sanford Health Plan in its lawsuit against the federal government for failing to pay more than $8.9 million in the risk corridor payments. McBrady did not return calls or emails seeking comment.

Julie Snyder, the vice president of corporate communications at HealthNow, however, said in an emailed statement, “The risk corridors program was established in law to mitigate the uncertainties and unknowns of the newly forming individual and small group market in light of the new coverage opportunities and requirements of the ACA. HealthNow brought tens of thousands of people into coverage, many for the first time, giving people newfound access to care. HealthNow followed the law and helped expand the markets in terms of individual coverage through the exchanges. It is important for the Government to follow through on its payment obligations.”

— Read ACA Risk-Adjustment Program Chokes Remaining ACA CO-OPs on ThinkAdvisor.

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