Court Dismisses Blue Cross and Blue Shield of North Carolina’s Risk Corridor Lawsuit—What About the Other Risk Cases?

On April 18, the United States Court of Federal Claims dismissed Blue Cross and Blue Shield of North Carolina’s (BCBSNC) risk corridor lawsuit, ruling that the insurer’s claim was premature, as the government “may continue to make up any shortfall” in risk corridor payments.

The Affordable Care Act’s (ACA) risk corridor program was designed to ease insurers’ entrance into the exchange market for 2014, 2015, and 2016, wherein qualified health plan (QHP) losses and profits that surpassed a certain target would be shared. Insurers with higher than expected profits would pay into the program, while those with heavy losses would collect reimbursements from the fund. However, 2014 and 2015 marketplace losses outpaced the profits paid in, and in the Fall of 2015, the Department of Health and Human Services (HHS) announced that it could only pay out $362 million of the requested $2.87 billion, just 12.6 percent. This shortfall put a significant financial strain on insurers, leading to market exits, the closing of many co-ops, and triggering a stream of litigation aimed at collecting full reimbursement.

In June 2016, BCBSNC filed such a suit, alleging that the government is “obligated by statute, regulation and contract” to pay the company $147 million in mandatory risk corridor payments for 2014—of which it received only $18 million—in addition to an estimated $175 million for 2015. The company argued that the government’s failure to fulfill its promise exacerbated losses and made it more difficult to sell ACA products. BCBSNC brought statutory, breach of contract, and takings claims. On the other side, the government moved to dismiss the case, claiming that since final payments aren’t due until 2017, BCBSNC’s “claims are not ripe,” as HHS has not yet determined how much of the program payments the insurer may ultimately receive. Furthermore, HHS argued that it does not have a contractual obligation to make full, annual payments under the ACA.

In last week’s decision, Judge Lydia Kay Grissby sided with the government, agreeing that neither the ACA nor its implementing regulations “addresses, nor establishes, a deadline for the payment,” and therefore, BCBSNC is not entitled to payments, “until, at a minimum, the agency completes its calculations for payments due for the final year.” (emphasis added)

While BCBSNC’s argument was deemed premature, two dozen other insurers (by our count) have brought similar cases against the government, including claims related to the risk adjustment program. To date, few have reached a decision, with mixed experiences along the way. The table below provides a snapshot of where these cases stand now.

 

Insurer Original Filing Alleging Status
Health Republic of Oregon February 2016 Government liability for up to $5 billon April 12, 2017

U.S. Court of Federal Claims

Government opposes summary judgment

January 3, 2017

Certified as a class action

Iowa’s CoOpportunity Health

 

May 2016 Government liability for over $130 million March 28, 2017

U.S. Court of Appeals for the Eighth Circuit

Motion of appeal is dismissed

March 16, 2017

U.S. District Court for the Southern District of Iowa

Dismissed for lack of jurisdiction

Highmark and First Priority Life Insurance May 2016 Government liability for $223 million, less any prorated amount paid for 2014 April 7, 2017

U.S. Court of Federal Claims Supplemental briefs submitted

Land of Lincoln Mutual Health Insurance Company

 

June 2016 Government liability for nearly $73 million January 31, 2017

U.S. Court of Appeals for the Federal Circuit

Appellants brief submitted

November 10, 2016

U.S. Court of Federal Claims

Ruling: Dismissed; “Lincoln is not entitled to full payments annually.”

Moda Health

 

June 2016 Government liability for over $214 million February 9, 2017

U.S. Court of Federal Claims

Ruling: “…the Government has unlawfully withheld risk corridors payments from Moda, and is therefore liable…for Moda’s full risk corridors…”

Government’s response was due April 28, 2017

Evergreen Health Cooperative June 2016 Flawed risk adjustment methodology unfairly penalizes smaller insurers; would require insurer to pay 26 percent of 2015 premium revenue February 2, 2017

United States District Court for the District of Maryland

Voluntary dismissal entered*

July 21, 2016

United States District Court for the District of Maryland

Motions for preliminary injunction and temporary restraining order; or expedited hearing and preliminary injunction denied

Maine Community Health Options August 2016 Government liability for nearly $23 million April 10, 2017

U.S. Court of Federal Claims

Supplemental briefs submitted

New Mexico Health Connections September 2016 Government liability for over $23 million September 26, 2016

U.S. Court of Federal Claims

Motion to stay pending decision in Land of Lincoln

Blue Cross of Idaho October 2016 Government liability for over $79 million, less any prorated amount paid for 2014 and 2015 March 7, 2017

U.S. Court of Federal Claims

Motion to stay pending decision in Land of Lincoln

Blue Cross and Blue Shield of Minnesota October 2016 Government liability for over $6 million December 1, 2016

U.S. Court of Federal Claims

Joint motion to stay pending decision in Land of Lincoln

Minuteman Health

 

October 2016 Government liability for over $5.5 million December 1, 2016

U.S. Court of Federal Claims

Joint motion to stay pending decision in Land of Lincoln

Montana Health CO-OP October 2016 Government liability for approximately $42 million February 23, 2017

U.S. Court of Federal Claims

Supplemental briefs submitted

Alliant Health Plans November 2016 Government liability for over $10 million December 14, 2016

U.S. Court of Federal Claims

Unopposed stay

Blue Cross and Blue Shield of South Carolina November 2016 Government liability for over $19 million December 28, 2016

U.S. Court of Federal Claims

Unopposed stay pending developments in other cases, including BCBSNC

Neighborhood Health Plan December 2016 Government liability for $29.8 million January 30, 2017

U.S. Court of Federal Claims

Stay granted

Health Net December 2016 Government liability for $85.8 million for 2014 and $322.6 million for 2015 March 1, 2017

U.S. Court of Federal Claims

Motion to stay pending decision in Montana Health CO-OP

Harvard Pilgrim Health Care (HPHC) January 2017 Government liability for over $19 million April 13, 2017

U.S. Court of Federal Claims

Government’s motion to dismiss submitted

Medica January 2017 Government liability for $7.6 million March 10, 2017

U.S. Court of Federal Claims

Joint motion to stay pending decision in earlier cases

Blue Cross and Blue Shield of Kansas City January 2017 Government liability for over $22 million, less any prorated amount paid January 23, 2017

U.S. Court of Federal Claims

Pending—no recent activity

Molina January 2017 Government liability $52.3 million March 24, 2017

U.S. Court of Federal Claims

Molina’s motion for summary judgment denied, in light of other active cases

Blue Cross and Blue Shield of Alabama March 2017 Government liability for over $90 million March 14, 2017

U.S. Court of Federal Claims

Pending—no recent activity

Blue Cross and Blue Shield of Tennessee March 2017 Government liability for over $150 million March 14, 2017

U.S. Court of Federal Claims

Pending—no recent activity

Sanford Health March 2017 Government liability for $3 million for 2014 and $5.8 million for 2015 April 20, 2017

U.S. Court of Federal Claims

Government’s motion to stay pending decision in Maine Community Health Options

Receiver of Nevada Health CO-OP March 2017 Asks that monies claimed against the insurer be offset by risk payments owed ($9.5 million for 2014; $33.6 million for 2015) March 16, 2017

U.S. District Court, District of Nevada

Pending—no recent activity

*Evergreen entered a voluntary dismissal as part of an agreement with CMS to exit the CO-OP program and transition to for-profit status.

Looking Ahead: While few cases have reached a decision (BCBSNC, Land of Lincoln, Moda), it is clear that courts are taking a range of approaches to determine whether and when insurers might be entitled to full risk corridor payments. Given the uncertainty of health reform at the federal and state levels, insurers are likely to pursue a range of options to better their financial stability moving forward. If full risk payments are not made when the final payments are due, it is likely that such litigation will continue.

 

Leave a Reply

Your email address will not be published. Required fields are marked *