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: