US government ordered to pay Moda $214M over risk corridor program

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Dive Insight:

Legal and political battles over the risk corridor program have been brewing for some time. At least seven payers have sued the government over money owed through the program, according to one New England Journal of Medicine article. One lawsuit, filed by Republic Health, was certified as class action about a year ago, which could prompt even more payers to seek risk corridor funds in court.

The decision in the Moda case was issued in, as The Oregonian put it, “a strongly worded opinion.” “The government made a promise in the risk corridor program that it has yet to fulfill,” Judge Thomas C. Wheeler wrote in his ruling. “Today, the court directs the government to fulfill that promise. After all, to say to [Moda], ‘The joke is on you. You shouldn’t have trusted us,’ is hardly worthy of our great government.”

While the ruling may offer a glimmer of hope to other payers suing the government, it is not clear how courts will rule in the future. In November, a federal judge in Illinois ruled against Land of Lincoln Health, a health insurance co-op that had sought $75 million. Judge Charles Lettow determined that exchange issuer agreements were not binding. That ruling factored into a decision by Humana to write off $591 million in risk corridor losses rather than pursue legal action.

The risk corridor program was supposed to be budget neutral. The idea was that funds from payers with low costs would be redirected to payers with high costs. However, only 15% of payers had low enough costs to pay into the program and that would not cover funds owed to around 70% of payers. Congress could have appropriated funds to pay the money owed, but declined to do so in 2015 and 2016.

The Department of Justice under the Obama administration indicated willingness to settle with payers, but lawmakers opposed to the ACA pushed back against that plan, as Nicholas Bagley wrote for NEJM. The Trump administration is now in an awkward position when it comes to risk corridor lawsuits. It can either move to settle with payers, which could be seen as bailing them out, or defend the ACA in court, despite having vowed to dismantle it.

Filed Under: Payer Health Law Policy & Regulation
Top image credit: Wikimedia