In a brief Order issued on December 5, 2016, in U.S. House of Representatives v. Burwell, the U.S. Court of Appeals for the D.C. Circuit granted the motion filed by the U.S. House of Representatives (House) seeking to put the lawsuit challenging the Affordable Care Act’s (ACA’s) cost-sharing subsidies on hold until the Trump administration takes over.  In granting the stay, the court also directed the parties to file motions to govern further proceedings for the case by February 21, 2017.  The Order was issued by the three judge panel hearing the case, Judges Henderson, Tatel and Srinivasan.  Judge Henderson was appointed by President George W. Bush, Judge Tatel by President Clinton and Judge Srinivasan by President Obama.

As we have discussed in prior posts, the House is asking the court to bar the issuance of cost-sharing subsidies to eligible ACA policyholders unless and until Congress appropriates the funds. The ACA cost-sharing reduction program reduces co-pays, co-insurance and deductibles for individuals with incomes of up to 250% of the federal poverty line who enroll in “Silver” plans through the healthcare exchanges. If the lower court decision agreeing with the House position is affirmed, one of the central features of the ACA making insurance and healthcare coverage affordable to millions of Americans would be removed.

In a motion filed after the November election, the House asked the court to put the case on hold to give the incoming Trump administration the opportunity to decide whether to amend, repeal or replace the ACA. According to the motion, representatives of the House and the Trump transition team are in discussions regarding options that could resolve the matter.

What lies in store for the ACA is being closely watched.  Few programs have been as controversial, have had such broad impact and great consequence.  The new administration, Congress and the many stakeholders will be debating and seeking to influence future policy directions.  The details of what is broadly described by terms such as repeal, repeal and replace, repeal and delay – will determine the future of healthcare for years to come.

The Department of Justice (DOJ) has filed its response to the motion filed on behalf of the U.S. House of Representatives (House) seeking to put the lawsuit challenging the Affordable Care Act’s (ACA’s) cost-sharing subsidies on hold until the Trump administration takes over. Not surprisingly, the DOJ strongly opposes the House request.

In U.S. House of Representatives v. Burwell, the House is asking the court to bar the Obama administration from issuing cost-sharing subsidies to eligible ACA policyholders unless and until Congress appropriates the funds. The ACA cost-sharing reduction program reduces co-pays, co-insurance and deductibles for individuals with incomes of up to 250% of the federal poverty line who enroll in “Silver” plans through the healthcare exchanges. The administration has argued that the House does not have legal standing to bring its suit and in any case, the ACA supports payment of the cost-sharing subsidies. The district court agreed with the House and the administration has appealed the rulings to the Court of Appeals for the D.C. Circuit.

In a motion filed after the November election, the House is asking the court to put the case on hold to give the incoming Trump administration the opportunity to decide whether to amend, repeal or replace the ACA. According to the motion, representatives of the House and the Trump transition team are in discussions regarding options that could resolve the matter.

In its response opposing the hold request, the DOJ notes that the monthly subsidy payments have been made since 2014 and Congress has taken no legislative action to restrict the ongoing payments. The DOJ says the House suit is unprecedented and raises separation of powers concerns. According to the DOJ, the case “meddl[es] in the internal affairs of the legislative branch” by allowing one House of Congress to circumvent the legislative process. The DOJ states that if the House wants to eliminate the subsidies it should enact legislation, which would require the House to obtain the agreement of the Senate, present the resulting measure to the President, and to accept responsibility for the results.

The DOJ says that the House is seeking to decide how laws will be executed – but that is the job the constitution assigns to the executive branch. Further, the DOJ argues that the House is asking the court to go beyond the judicial branch’s constitutional authority as well. According to the DOJ, the election did not change these constitutional principles and the incoming administration likely won’t agree that the House should be able to alter the way the executive branch administers federal law.

Beyond the procedural concerns, the DOJ states that the lower court adopted a misguided interpretation that “would thwart the structure of the ACA’s carefully calibrated system of subsidies, severely disrupt the insurance markets, and – perversely – lead to substantially greater federal expenditures.” The DOJ referred to amicus briefs filed by the insurance industry expressing concerns about the dire impact sudden removal of the subsidies could have on the insurance market.

The DOJ points out that the ACA and its subsidy provisions remain the law of the land and requiring the House to file its appellate brief on the agreed upon schedule will not constrain the incoming President, as the House asserts. Denying the motion will simply allow the appeal to proceed in an orderly and timely fashion.

The DOJ did offer a way out for the House to avoid proceeding with the case, stating that the administration has no objection if the House wishes to dismiss the case and if the court vacates the lower court decision that agreed with the House position. With such a resolution being highly unlikely, the House’s request is now teed up for the court to rule on the motion.

We will continue to follow this case so check back for further developments.

A link to the DOJ response is below:

http://premiumtaxcredits.wikispaces.com/file/view/DCC%20Govt%20op%20to%20abeyance%20mo.pdf/600275754/DCC%20Govt%20op%20to%20abeyance%20mo.pdf

Attorneys for the United States House of Representatives (House), in U.S. House of Representatives v. Burwell, the case challenging certain cost-sharing subsidies in the Affordable Care Act (ACA), filed a motion asking the D.C. Circuit Court of Appeals to put a hold on the briefing in the case until after the Trump administration takes office.

As reported in our prior posts, the House filed suit asking the court to bar the federal government from issuing cost-sharing subsidies to eligible ACA policyholders unless and until Congress appropriates the funds. The ACA cost-sharing reduction program reduces co-pays, co-insurance and deductibles for individuals with incomes of up to 250% of the federal poverty line who enroll in “Silver” plans through the healthcare exchanges.

The Obama administration has argued that the House does not have legal standing to bring its suit. The administration also argued that the ACA supports payment of the cost-sharing subsidies. After the district ruled that the House had standing to bring the suit and also agreed with the House on the merits of its claim, the Obama administration appealed the rulings on both issues to the Court of Appeals for the D.C. Circuit.

On October 24, 2016, the Obama administration filed its opening brief asking the court to overturn the lower court’s decision. The House’s answer brief is due on December 23rd and the administration’s reply brief, which would complete the briefing of the case, is due on January 19th, the last day full day of the Obama administration.

In its motion filed on November 21st, the House has asked the court to pend the case until February 21st, to give the incoming Trump administration the opportunity to decide whether to amend, repeal or replace the ACA. According to the motion, representatives of the House and the Trump transition team are in discussions regarding options that could resolve the matter. The House motion notes that the Obama administration opposes the request for a hold.

The House argues that the court has the authority to manage its docket and stay the proceedings if it chooses to do so. It provides examples of other cases where courts have held proceedings in abeyance when there has been a change in administrations.

The House also says that putting the matter on hold makes sense because there is a high degree of likelihood of a meaningful change in policy in the new administration that could either obviate the need for resolution of the appeal or affect the nature and scope of the issues presented for review. According to the House, “in light of the President-Elect’s stated position, and the potential for resolution of this matter, the requested abeyance will serve to prevent the unnecessary and inefficient expenditure of valuable public resources in all three branches of the federal government that could otherwise result from unnecessary and premature briefing and judicial consideration of this appeal.”

Citing other pressing duties and a limited staff, the House asks that if the court does not hold the matter in abeyance, that it allow the House a 45-day extension of time to file its answer brief. Such an extension would, of course, accomplish the same end sought by the request for abeyance, that is, the opportunity for the next administration and the House to reconsider their positions with regard to the litigation.

The Obama administration’s response to the House motion is due on December 5, 2016. It will be interesting to see how the administration responds. Short-term extensions of time are typically uncontroversial, but in this case, with the possibility of the case being poised for a Court of Appeals decision while the Obama administration is still in office, the stakes of holding the case in abeyance or granting an extension of time are magnified.

Also, while there may be agreement between the incoming administration and the House on the advisability of the subsidies, other issues may come into play in determining the position of the new administration regarding the standing issue addressed in the case. Representatives of the new administration may have a different view than the House regarding the relative powers of the different branches of government.

Furthermore, if the court agreed with the House position, sudden elimination of the subsidies could create chaos in the insurance system, which the new administration and the Republican majority Congress may wish to avoid. On the other hand, a court decision upholding the subsidies would put the House and administration in the difficult political position of either accepting the subsidies, thus alienating ACA opponents, or removing them, and alienating those who rely on the subsidies to afford their healthcare coverage.

The preference of the House and the new administration appears to be to seek a settlement or resolution that avoids having the court resolve these questions and allows the new administration’s plans regarding the ACA to be developed and rollled out in a more controlled fashion.

We will continue to watch developments in this important case.

The stunning election of Republican Donald Trump as President of the United States triggers many questions, including what will happen to the Affordable Care Act (ACA) when the new President Trump takes office in January. President-elect Trump made campaign statements, both verbally and in written position papers, that the ACA should be completely repealed, stating that on the first day of his administration “we will ask Congress to immediately deliver a full repeal of Obamacare.” In addition, President-elect Trump wants to allow insurers to sell across state lines, provide individuals with tax deductions for health insurance premiums, make Health Savings Accounts (HSAs) more flexible, require price transparency from all healthcare providers, give states block grants to address local needs for Medicaid, and remove barriers that interfere with consumers being able to access to prescription drugs outside the U.S. Mr. Trump believes that these changes will increase competition and lower healthcare costs for Americans.

Is it likely to happen? Full repeal, of course, requires Congress to act and that may be easier said than done in terms of coming to agreement on how and what the healthcare arena should look like if the ACA is no longer law. Although there is a Republican majority in the Senate, getting 60 votes needed to get past Democratic filibusters against repeal of the law may prove difficult. In addition, deconstructing a complex set of laws and regulations that have evolved over the last six years and affect virtually all consumers and the healthcare industry is not an easy task. On that note, it will be interesting to see what actions, if any, the current administration will take before the end of the year regarding the ACA’s troublesome Reinsurance, Risk Adjustment, and Risk Corridor programs, commonly referred to as the “3Rs,” including the current litigation by insurers regarding the Risk Corridor payments.

Alternatively, without wholesale repeal the new President Trump could significantly impact how the ACA works through administrative agency action or inaction. For example, he could shift the direction of the continuing implementation of the law through the Health and Human Services Department (HHS) by suspending certain regulations that he believes are problematic. In addition, he could take steps such as dropping the appeal addressing a federal court’s ruling that Congress did not appropriate funds for the ACA’s cost sharing reduction subsidies, institute new rulemakings to tweak troublesome aspects of the law as currently implemented, and get smaller scale changes to the law passed by Congress. Leaving the ACA in place and revising it significantly through permissible means without full repeal may provide the flexibility to maintain the one clearly popular aspect of the law, which is increased health insurance coverage for individuals and families without preexisting condition or underwriting requirements, something President-elect Trump has commented that he wants for the American people. Although Mr. Trump could impact many aspects of the law through executive or administrative agency means, he may be reluctant to do so given his comments referring to overreaching regulatory agencies.

What will happen to the ACA in the Trump administration is murky and initial guesses are speculative at best. What is clear, however, is that the change the healthcare industry has experienced since 2010 continues at an even more rapid pace with Mr. Trump’s election, indicating an unknown future ahead. We will follow the upcoming developments closely.

Readers of this blog may recall that on September 9, 2016, the federal Department of Health and Human Services (HHS) – through its Centers for Medicare and Medicaid Services (CMS) – announced that it is open to discussing resolution of claims made by the Qualified Health Plans (QHPs) providing coverage on the Affordable Care Act (ACA) exchanges seeking payment of amounts owed under the Risk Corridors program. That announcement also said that “[a]s in any lawsuit, the Department of Justice is vigorously defending those claims on behalf of the United States.” In Motions to Dismiss filed in the lawsuits seeking Risk Corridors payments brought by Blue Cross and Blue Shield of North Carolina, Moda Health Plan and Land of Lincoln Health Insurance Company, the Department of Justice (DOJ) has delivered on that promise.

Notably, the arguments in the DOJ’s motions go further than the arguments it has made in the past in other cases, such as the putative class action filed by the Oregon co-op, Health Republic Insurance Company (Health Republic of Oregon), and assert that the government is under no obligation to make the Risk Corridors payments if the program is not funded. The House of Representatives, observing that the DOJ did not file a similar motion to dismiss in the Health Republic of Oregon case, requested that it be permitted to file an amicus brief in that case to bring the arguments in the recent DOJ motions to the court’s attention.

In its recent briefs, the DOJ has reiterated the arguments it has made previously in the Health Republic Oregon case stating that because the three-year payment framework for Risk Corridors has not yet run its course, QHPs have no present right to full payment of their receivables from the program. Even though additional funding in the near future seems improbable, DOJ nevertheless argues that whether sufficient funds will be available to make full payment of claims for any particular benefit year or at some point in the future is unknown. As a result, DOJ asserts the claims cannot be brought at this time.

But, in a significant expansion of the arguments made previously in Risk Corridors litigation, in the motions to dismiss, DOJ also argues that the ACA does not require that risk corridors payments be made in excess of collections from QHPs. According to the DOJ, the program was intended to be self-funding pointing out that the ACA contains no reference to any other source of funds.

The DOJ refers to the appropriations riders that Congress enacted after the ACA’s passage that prohibit HHS from using other sources of money to fund the Risk Corridors program to reinforce its position that liability for Risk Corridors payments is limited to amounts collected under the Risk Corridors program. The DOJ relies on cases where courts have said that provisions enacted in annual appropriations laws can amend money-mandating provisions in previously enacted law, which allows a subsequent law to eliminate or reduce the government’s obligation to pay.

The QHPs have also argued that the government’s failure to make Risk Corridors payments violates the contracts QHPs must sign to offer plans on the exchanges. The DOJ’s response is that the QHP contracts are limited in scope and don’t apply to Risk Corridors payments. They assert that the United States has no contractual obligation to make Risk Corridors payments and that any amounts determined to be owed or due for Risk Corridors arise only as a matter of statute and regulation. As a result, the only recourse for QHPs is through Congress or HHS, not through the courts.

The DOJ also rejects the argument that there is an implied contractual obligation that the government make Risk Corridors payments because the QHP contracts don’t require the payments and insurers such as Moda operating in states with their own exchanges don’t even have QHP agreements with HHS. To arguments that the QHPs are relying on promises and statements made by HHS that the payments will be made, the DOJ says that such promises and statements don’t create a legal obligation for the United States. According to DOJ, “[a]n agency simply cannot bind itself to the payment of money through its oral or written statements— absent express contracting authority bestowed by Congress.”

The categorical rejection of the QHPs’ claims for Risk Corridors payments in the motions is curious in light of the prior CMS announcement of its interest in settling the litigation. Whether the legal positions asserted by DOJ are intended to provide leverage in settlement negotiations or indicate a change in or divergence of opinion within the government will be closely watched as the issues surrounding the Risk Corridors program continue to develop.

The motions have received considerable attention, including from the House of Representatives. The House, seeing that the new arguments had not been made in the Health Republic of Oregon case, filed an amicus brief reiterating the DOJ’s new arguments so the court can consider those arguments in that case.

The next step in these cases will include the filing of responses by the QHPs to the motions seeking to counter the DOJ’s arguments.

As we approach the end of the Obama administration we can anticipate a flurry of activity surrounding the Risk Corridors program in the courts, in settlements talks between the QHPs and the administration, and in the Congress. Stay tuned as we continue to track these matters.

The links below are to the motions and briefs:

BCBSNC – DOJ Motion to Dismiss

Moda Health Plan – DOJ Motion to Dismiss

Land of Lincoln-DOJ Motion to DIsmiss

Health Republic Insurance-House Amicus Brief

Since the first cases were filed earlier this year, we have been following nationwide litigation seeking full risk corridors payments to qualified health plans (QHPs) providing coverage on the Affordable Care Act (ACA) exchanges.

Most recently, in a bulletin dated September 9, 2016, the federal Department of Health and Human Services (HHS) – through its Centers for Medicare and Medicaid Services (CMS) – has announced that it is open to discussing resolution of those claims. The bulletin also suggests a process through litigation that could allow other QHPs to seek recovery of amounts they are owed in risk corridors payments. The bulletin could open another front in the political battle over the ACA that has ebbed and flowed since 2010.

The risk corridors program is one of three programs (collectively referred to as the 3Rs) designed to stabilize the health insurance market impacted by the implementation of the ACA. The risk corridors program is designed to limit gains and losses in the first three years of the health insurance or exchanges; the basic idea is to collect funds from insurers whose total claims fall below certain target amounts and pay insurers that have experienced higher than expected claims that exceed target amounts.

For 2014, insurers with results below the claims threshold were required to pay approximately $362 million in risk corridors charges. Insurers with higher claims were entitled to approximately $2.87 billion in risk corridors payments. Congress did not appropriate funds to make up the shortfall. Further, in budget bills Congress prohibited the use of other funds available to HHS for risk corridors payments. As a result, CMS only paid approximately 12.6% of the risk corridors payments owed for 2014, stating that it intends to make-up the shortfall with risk corridors funds collected in subsequent years and that it will work with Congress to fully fund the program.

Seeking to recover amounts they are owed, some insurers have sued HHS, arguing that the ACA requires that they be paid in full. HHS does not dispute that the ACA requires full risk corridors payments, but has argued the lawsuits are premature because the full extent of gains and losses cannot be known until the end of the three-year program.

In its September 9th bulletin, CMS announced that preliminary information suggests that risk corridors collections in 2015 will again not cover amounts owed to insurers under the risk corridors program. The agency reported that 2015 risk corridors collections will be applied to make up the 2014 shortfall, but will not fully cover those obligations or allow payment of any of the 2015 obligations at this time.

In an unusual statement, HHS acknowledged the pending risk corridors litigation and invited settlement discussions, writing:

“We know that a number of issuers have sued in federal court seeking to obtain the risk corridors amounts that have not been paid to date. As in any lawsuit, the Department of Justice is vigorously defending those claims on behalf of the United States. 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.”

It is noteworthy that a different source of federal funds, the Judgment Fund, may be available to pay settlements in the risk corridors litigation. The Judgment Fund is a permanent appropriation available to pay judicially and administratively ordered monetary awards against the United States.

The bulletin has raised questions regarding the reasoning and intent behind the statements regarding settlement of the litigation. HHS may believe that it has a weak legal position and is pragmatically trying to resolve the cases in a manner as favorable to the government as possible. Other observers see this as an end-run around the federal budget process. Still others see it as a creative step to help support the viability of the insurance exchanges. Because HHS acknowledges the validity of the obligations and is charged with implementing the ACA, this last view is not an unreasonable interpretation. In any event, if the Judgment Fund can provide a source of funds for risk corridors payments, other similarly situated insurers will likely consider filing their own suits to recover amounts they are owed.

The HHS September 9, 2016, bulletin regarding Risk Corridors Payments for 2015 can be found here:

https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/Risk-Corridors-for-2015-FINAL.PDF

Legal challenges to controversial provisions in the Affordable Care Act (ACA) continue to work their way though the courts.  In a follow-on to the Supreme Court’s decisions in Burwell v. Hobby Lobby and Zubik v. Burwell (cases addressing how the ACA’s contraceptive coverage mandate applies to companies and religious organizations holding religious objections to certain forms of contraception) a secular pro-life group, Real Alternatives, Inc., has sued the federal government challenging the requirement that the company provide contraceptive coverage to its employees through its health plan.

Real Alternatives claims that requiring the coverage violates the Equal Protection clause of the U.S. Constitution and the federal Administrative Procedures Act (APA).  The group filed an appeal with the U.S. Court of Appeals for the Third Circuit from a federal district court decision denying the claim that the group should not have to provide contraceptive coverage.

The group argues that since it shares the same views on contraceptive coverage as religious groups exempt from the mandate, the exemption cannot be withheld from non-religious groups.  In addition, the group argues that it is irrational and unconstitutional for the government to refuse to extend the same exemption religious groups have to groups opposed to contraceptive coverage for ideological reasons.

Interestingly, the group contends that equal protection rights are denied because secular groups with ideological objections to contraceptive coverage deserve the same protections afforded to religious employers with similar objections.  The APA is violated because the requirement is “irrational and capricious” according to the group.

The group asserts that the basis for the exemption provided to religious organizations is not the religious character of the organizations, rather it is that the women employed by religious organizations most likely do not want the coverage.  That same rationale would apply to employees of Real Alternatives.  When a group and its employees do not want contraceptive coverage to be included, such coverage should not be required.

The group also claims the coverage requirement violates the Religious Freedom Restoration Act because the government has not shown that the mandate advances a compelling governmental interest.  Since the use of certain contraceptives violates the religious beliefs of Real Alternative’s employees, the mandate that the plan include such coverage imposes a substantial burden on the exercise of their religious beliefs.  The government allows an exception for religious employers and it should be able to accommodate the beliefs of the Real Alternative employees and offer the same exception to employees of secular employers with similar objections to the coverage.

The federal government has not yet filed its response to the appeal.  The government is likely to agree with the lower court judge that allowing an exemption in this case could lead down a path to giving exemptions to those with moral objections to any laws.  The judge noted in his opinion that religious organizations do get special protections that are not available to secular organizations.  He also pointed out that the mandate does not require the employees to modify their behavior in a manner contrary to their beliefs.

It is significant that a judge in a district court in D.C. came to a contrary conclusion, ruling that a secular, anti-abortion group can be exempt.  In the event decisions of the Courts of Appeals considering similar challenges are inconsistent or if the Supreme Court decides to take this issue on, we may see another ACA case at the high court.

We will continue to follow these cases as they proceed.

Land of Lincoln Mutual Health Insurance Company, one of the Consumer Operated and Oriented Plans (CO-OPs) set up under the Affordable Care Act (ACA) and intended to provide an alternative to traditional insurers and foster competition in the state marketplaces, is facing difficult financial circumstances. The company, the Illinois insurance regulator and the federal government have all taken steps recently to keep the company operating.

Land of Lincoln has joined at least six other of the Qualified Health Plans (QHPs) that offer health insurance coverage on the ACA healthcare exchanges by filing a lawsuit against the federal government seeking amounts owed under the ACA Risk Corridors program. As explained in our prior posts, Risk Corridors is one of three programs established under the ACA to provide market stability in the first few years of the exchanges. Known as the 3Rs, the Risk Corridors, Risk Adjustment and Reinsurance programs, were designed to protect insurers from the losses anticipated as a result of the uncertainty inherent in the expanded health insurance market.

Like most of the other suits we have blogged about previously, Land of Lincoln filed its case in the U.S. Court of Federal Claims, a court of limited jurisdiction that is authorized to hear money claims against the federal government. In its lawsuit, Land of Lincoln is asking the court to award approximately $70 million the company claims it is owed under the Risk Corridors program.

Most recently, the Illinois Department of Insurance has also taken action to keep Land of Lincoln afloat by ordering the company not to make Risk Adjustment payments to the federal government. Under the Risk Adjustment program, insurers that have enrolled healthier and therefore less expensive to cover enrollees pay into the program while insurers covering less healthy, more expensive to cover enrollees receive payments from the program. In a June 30, 2016 letter to CMS describing an Agreed Corrective Order, the Illinois Acting Director of Insurance informed CMS that she ordered Land of Lincoln not to pay the approximately $31.8 million CMS announced Land of Lincoln owes in Risk Adjustment payments for 2015. In a separate Stipulation and Consent Order, the Director ordered Land of Lincoln not to renew small and large group policies and to not write any new business without the Director’s prior written approval.

The federal government has also taken steps intended to help the remaining CO-OPs survive. In May of this year, the Centers for Medicare & Medicaid Services issued a regulation allowing CO-OPs to seek funding from private investors. That and other rule changes are intended to support the financial viability of the CO-OPs and give them the flexibility of other private insurers. While Land of Lincoln is reported to have sought private funding, reports are that its efforts to obtain such funding have so far been unsuccessful.

The Illinois Department’s letter to CMS, including the Agreed Corrective Order and the Stipulation and Consent Order, can be viewed at the following link:

http://insurance.illinois.gov/newsrls/2016/06/coop_06302016.pdf.

To update our recent post, “Exchange Players File ACA Lawsuits Against CMS,” two new suits were filed by Qualified Health Plan (QHP) issuers selling coverage on the Affordable Care Act (ACA) exchanges. As described in our earlier post, for 2014, QHP issuers paid a total of $362 million in risk corridors charges to the government and asked for payments from the program of $2.87 billion. As a result, the Department of Health and Human Services (HHS) only paid 12.6 percent of the amounts owed. Regarding the remaining two years of the three-year risk corridors program, HHS told issuers that it would not know the total loss or gain for the program until the fall of 2017, and that in the event of a shortfall HHS will explore other sources of funding for risk corridors payments, subject to the availability of appropriations.

The two new lawsuits are described below:

1. Blue Cross Blue Shield of North Carolina

In one case, Blue Cross Blue Shield of North Carolina (BCBSNC) filed suit in the U.S. Court of Federal Claims seeking payments under the risk corridors program, one of the three premium rate stabilization programs, known as the 3Rs, created by the ACA.

BCBSNC claims that the federal government’s failure to make full risk corridors payments breaches the QHP contracts between BCBSNC and the federal government and is also a “taking” in violation of the U.S. Constitution. BCBSNC is seeking in excess of $147 million, less the partial payments made by the government, representing the amount of risk corridor payments owed to BCBSNC for 2014. The company is also asking the court to order the government to make full risk corridor payments for 2015 and 2016. The case was brought under the Tucker Act, which provides a cause of action for claims for damages over $10,000 against the United States.

BCBSNC asserts that the promise of financial risk sharing through the risk corridors program was a significant factor in its decision to become a QHP and to participate in the ACA exchanges. The company notes that it had contractually committed to participate in the exchanges when the government announced that it would implement the risk corridors program in a budget neutral, rather than fully funded, manner. The company argues that there are no provisions in the ACA limiting the government’s obligation to make full risk corridor payments owed to QHPs. BCBSNC also refers to statements in which the government, through HHS, acknowledged its obligation to make risk corridor payments. While Congress specifically targeted risk corridors payment obligations in appropriations bills that prohibited the use of federal money to fund risk corridors, the insurer claims that the failure to appropriate funds does not defeat the obligation that is still in the law to make risk corridor payments in full.

2. Moda Health Plan, Inc.

The second case was filed by Moda Health Plan, Inc. (Moda), an insurer operating in the Pacific Northwest and providing coverage in Alaska, Oregon, and Washington. Moda also filed its suit in the U.S. Court of Federal Claims and makes similar allegations. Moda is asking for risk corridors payment of approximately $89 million for its 2014 QHPs and $101 million for its 2015 QHPs. Moda also claims that the government breached its statutory and contractual obligation to make full risk corridors payments by paying out only $11 million of the amount that Moda is owed for 2014 and not paying any of its risk corridors obligations for 2015.

Moda claims that rates for QHP products were set based on the law’s provisions. Moda also points to other policy changes, such as HHS’s extension of its transitional policy, allowing individuals to stay on certain plans without ACA required benefits, as keeping healthier individuals on existing plans and making the QHP risk pool more expensive to cover.

Moda asserts that the failure to pay the full amount of the risk corridors payments has limited Moda’s ability to sell ACA plans in Alaska and Oregon. Regulators in those states will only allow Moda Health to continue to operate if it raises private capital to replace the loss the of risk corridors payments due in 2014 and 2015. Moda announced it has raised sufficient capital to continue to operate in Oregon for 2016 and 2017, but it will not be offering individual coverage in Alaska for 2017, where it was one of only two insurers offering coverage.

We will continue to update our posts following developments in these cases and additional lawsuits that may be filed by other insurers.