Health Law Checkup
Risk Corridor Payment Litigation
More specifically, the lawsuit arises out of the United States’ failure to pay in full the amounts owed to the Highmark insurers under the ACA’s risk corridor program for the calendar year 2014. Highmark is seeking the amount it says it is owed for 2014 under the risk-corridor program, which is approximately $223 million, minus the amount it has been paid so far, which is currently around $27 million. Highmark also is seeking interest and legal expenses. Further, Highmark is seeking declaratory relief that the government’s 2015 and 2016 risk corridor payments must be made on time and in full.
As part of the ACA, the federal government created the risk corridors program to mitigate the pricing risk to insurers. This risk was due to a lack of information on the past medical costs incurred by new ACA enrollees. The risk corridors program was intended to mitigate insurers’ financial losses each year from 2014-2016 by using payments collected from other insurers that profited on the new ACA business. So far, insurers have requested approximately $2.87 billion in risk-corridor payments based on their 2014 results while only $362 million came in from other insurers. Congress also stymied the risk-corridors program by allowing the Department of Health and Human Services to pay only 12.6% of risk-corridor payment requests for 2014 and 2015.
Highmark is not the first health insurance company to sue the federal government over the unpaid risk corridor amounts. In February, Health Republic Insurance Company of Oregon, one of the ACA’s not-for-profit co-ops that was forced to close, filed a class-action lawsuit that said it and other insurers were owed $5 billion in risk-corridor payments. In addition, last week Blue Cross and Blue Shield of North Carolina filed a lawsuit for $129 million in unpaid risk corridor payments for 2014. It is widely expected that other insurers across the country will file similar lawsuits.
