Dive Brief:
- With 17 of the original 23 ACA health insurance co-ops having folded, and another now slated to transition to for-profit to survive, numerous states are looking to fulfill their remaining commitments to former co-op members, providers and state guaranty funds owed hundreds of millions of dollars.
- Meanwhile, the CMS is also attempting to recoup at least some of the $2.4 billion in loans it provided to help launch the co-ops.
- The result has been a growing impasse between state and federal officials over which should be first in line, and how to prioritize payments to policyholders or taxpayers, SNL reported this week.
Dive Insight:
The dispute centers around CMS' withholding of payments to failed co-ops, via termination of their loan agreements, in order to offset the co-ops' debts to the federal government. The problem is that states say they still require the federal funding to cover the co-ops' remaining commitments. CMS has made such "offsetting" moves in at least eight states, according to research from S&P Global Market Intelligence, adding states are also pointing toward federal withholding of money owed to failed co-ops under the ACA's risk corridor and reinsurance programs.
The issue has resulted in a legal dispute over whether the CMS has the authority to maneuver around the formal liquidation process and effectively impede state regulatory jurisdiction. A test is in progress; Iowa launched a lawsuit over the matter in May, and other state officials have attempted other tactics to protest the offsetting.
If the federal government didn't offset, however, it would be at the end of the line behind members, providers, and secured creditors, where little to nothing would be left to collect. That would also would also leave the agency subject to even further criticism from Republicans over the lost money.
Meanwhile, a related battle is brewing over the billions owed to insurers under the risk corridors program. On one side, the administration is attempting a new workaround to bypass Republican opposition to the payments by using a Treasury Department fund to settle insurers' lawsuits, the Washington Post reported. Last month, the HHS essentially invited insurers to litigate in order to get their risk corridors payments, promising they were still "an obligation of the United States Government for which full payment is required."
On the other side, the DOJ is arguing insurers were never guaranteed that money and is asking the U.S. Court of Federal Claims to dismiss several such lawsuits, Modern Healthcare reported.