Dive Brief:
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Based on a preliminary analysis, the HHS said in a memo last week it anticipates that all risk corridors funds collected for the 2015 benefit year will go toward paying the outstanding amounts owed to insurers for the 2014 benefit year, when insurers who were owed money under the program only received 12.6% of their expected payments as a result of Congress' move in 2014 to change the program to be budget-neutral.
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Collections from the 2016 benefit year will also first go toward remaining 2014 payments, and then toward 2015 payments, before going toward 2016 benefit year payments.
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If a shortfall remains for the 2016 benefit year, which is the last year of the three-year program, HHS will have to look for other funding sources, "subject to the availability of appropriations," it said.
Dive Insight:
Numerous insurers have taken issue with the federal government's delayed payouts on the promised funds, which in some cases contributed to the collapse of insurers that had counted on that safety net when they set their initial marketplace rates.
The new HHS letter highlights the department's position between a rock and a hard place. On the one hand it continues to stand by the government's obligation to come through with the full payments, noting, "HHS will record risk corridors payments due as an obligation of the United States Government for which full payment is required."
On the other hand, the U.S. has to defend against the numerous lawsuits insurers have brought against the government, and opponents of the program continue to fight against what they argue would be a tax-payer funded insurance industry bailout, leaving funding a large question.
As a result, the HHS memo suggests it is open to settling insurers' lawsuits, inviting further litigation.
"As in any lawsuit, the Department of Justice is vigorously defending those claims on behalf of the United States," the memo says. "However, as in all cases where there is litigation risk, we are open to discussing resolution of those claims. We are willing to begin such discussions at any time."
Butler Rubin attorney Ursula Taylor suggested the invitation for settlement discussions is not very surprising given the government's position in which it must defend itself while also weighing the potential impact of withholding the payments on achieving the goals of the ACA.
"By this bulletin, CMS is saying that 'litigation risk' is a basis for paying," Taylor said. "As we’ve mentioned previously, I do not believe that the Obama administration will be willing to go so far as to pay lawsuits that have not been brought or at least demanded, and the language used here confirms that suspicion."
Lawsuits have already been filed this year by insurers including Health Republic Insurance, Highmark, and Blue Cross and Blue Shield of North Carolina and Moda Health Plans.