Dive Brief:
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Humana filed a lawsuit in the U.S. Court of Federal Claims against the federal government seeking $611 million in unpaid risk-corridor payments between 2014 and 2016.
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The Affordable Care Act (ACA) created the risk-corridor payment program to help insurers with riskier/most expensive members in ACA exchange plans.
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However, HHS and the CMS later said the program needed to reach budget neutrality and refused to make billions of dollars in payments to insurers.
Dive Insight:
The ruling could have implications for a slightly different payer issue — the decision to halt cost-sharing reduction payments. A judge recently declined to force the White House to continue the payments. It was the first part of a lawsuit more than a dozen state attorneys general have brought against the administration.
Humana is just the latest payer to file suit demanding risk-corridor payments. When created, the program was supposed to balance risk by helping payers with sicker patient populations. The risk-corridor program would provide extra funding to insurers with high costs. That money would come partially from insurers with lower costs.
However, 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. Congress also didn't fund the program in 2015 and 2016, which caused many health insurance co-ops in the ACA exchange markets to close.
Insurer lawsuits have had mixed results. A judge ruled in favor of Molina Healthcare and awarded the company $52 million. Moda Health won $214 million in a similar suit. On the other hand, a federal judge in Illinois ruled against Land of Lincoln Health, a health insurance co-op that had sought $75 million. That decision caused Humana to initially write off $591 million in risk corridor losses rather than pursue legal action. However, the payer, which has cut back its ACA plans and announced it will stop offering the plans altogether in 2018, is now once again turning to the courts.
In its lawsuit, Humana said the statute states that the government “will share in the losses for plans with higher than anticipated costs.” Humana argues that also means the government is responsible for making payments when there aren't enough payments from low-cost payers.