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.

*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.