Federal appeals court denies insurers billions in risk corridor payments
- HHS is not obligated to pay insurers about $12 billion in risk corridor payments under the Affordable Care Act, a court ruled Thursday. The decision was made by a panel of judges on the U.S. Court of Appeals for the Federal Circuit in a case brought by Moda Health.
- The ACA's risk corridors program was designed to help insurers adjust to a new and untested market during the ACA exchanges' nascence by offsetting potential losses. High performing insurers contributed to a fund that would pay out underperforming insurers. Congress has suspended the government's obligation to pay insurers each year.
- The U.S. Court of Claims directed HHS to follow through on its risk corridor payment to Moda Health last year, but the federal appeals court said the program "lacks the trappings of a contractual agreement." Moda Health said in a statement it plans to appeal the decision.
The decision will frustrate payers, which have dealt with a lot of upheaval in the ACA marketplaces. The Trump administration angered insurers last year when it stopped cost-sharing reduction payments meant to offset costs for lower-income beneficiaries. The markets’ instability has continued as the administration has pushed recently for more plans that don’t have to meet ACA requirements, like association health plans and short-term plans.
That has led to a number of payers pulling out of the exchanges altogether, while those who stay in have jacked up premium rates.
Moda Health, which offers health insurance in Oregon, Washington and Alaska, is one of a number of insurers that have sued the government because of the risk corridor program. Other payers include Highmark, Health Republic Insurance, Blue Cross and Blue Shield of North Carolina and Humana.
Because more insurers were owed from having higher ACA exchange costs than those with lower costs were able to make up for, HHS has not been able to pay insurers in full. Only 15% of payers had costs that were low enough to pay into the program. Those funds didn't cover the approximately 70% of payers that were considered high cost.
While Humana filed its lawsuit in November for unpaid risk corridor payments from 2014 to 2016, Congress didn't fund the program altogether in 2015 and 2016, a decision that caused many health insurance co-ops in the ACA exchange markets to close.
Insurers have mostly offset the cost of risk corridor contributions by way of higher premiums. There's still hope for insurers looking to collect their debt. In addition to appealing the decision to the Supreme Court, Moda Health could ask all Federal Circuit appeals court judges to rehear the case en banc.
- United States Court of Appeals for the Federal Circuit Moda Health Plan, Inc. v United States
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