The U.S. House of Representatives Committee on Energy and Commerce (Committee), which oversees the Department of Health and Human Services (HHS), recently sent a strong letter to HHS Secretary Sylvia Matthews Burwell after the Committee heard testimony from Andy Slavitt, Acting Administrator of the Centers for Medicare and Medicaid Services (CMS), regarding the Affordable Care Act’s (ACA’s) Risk Corridors program.

The Committee’s action followed the recent announcement by CMS that the agency is open to settlement talks to resolve lawsuits filed by insurers for risk corridors payments.  The Committee wants HHS to answer questions regarding tapping the Judgment Fund, a fund set up to pay monetary claims against the federal government, to make risk corridors payments.

Following the hearing, the Republican members of the Committee have requested documents and responses to questions about CMS’s plans to settle the lawsuits.  The Committee emphasized that “on two occasions Congress passed – and the President signed – appropriations provisions restricting the funds available for payments to insurers participating in the program, so that no federal funds would be made available to make additional payments.”

The Committee wants HHS to explain how it can square inconsistencies it sees in the operation of the Risk Corridors program.  The Committee notes that Congress was told the program would be implemented in a budget neutral fashion.  However, CMS told insurers that they would receive 100 percent of the amounts they claimed and that the federal government is obligated to pay the full amounts.  Nevertheless, CMS paid only 12.6 percent of claimed amounts for 2014 and has acknowledged that it is unlikely that the program will yield enough funds to pay the insurers the full amounts claimed for the three-year program.  The Committee questions how CMS can now settle the lawsuits filed to recover the full amounts claimed.

The Committee questions are sparked by CMS’s announcement that:

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.

The Committee wants CMS to explain how it intends to pay risk corridors settlements. The Representatives are concerned that taxpayer dollars from the Judgment Fund will be used to pay settlements when, in the Representatives’ view, Congress intended that no taxpayer dollars whatsoever should be used to fund risk corridors.  The Committee wants to know if CMS and the Department of Justice think the Judgment Fund can be used to settle risk corridors claims.

It has been reported that approximately 175 insurers are owed funds for risk corridors claims for 2014.  The claims for 2015 have not yet been finalized and the program continues through 2016.

How any settlement of risk corridors claims with CMS would be structured raise several questions:

  • Would the settlements be limited to those insurers that filed lawsuits?
  • Would the settlements also provide for payments for insurers that did not sue and would the Judgment Fund be available for such payments?
  • Can the class action suit filed by Health Republic Insurance Company, the Oregon CO-OP, in February of this year provide a platform for a global settlement with all Qualified Health Plans owed amounts under the risk corridors program?
  • What was CMS alluding to when it said that the Department of Justice would vigorously defend claims for risk corridors payments. (That question may have been answered at least in part in Motions to Dismiss filed in risk corridors cases and will be discussed in a follow-up to this post.)

Whatever happens, it is a good bet that we will see continue to see Congressional scrutiny over any settlement involving payment of risk corridors claims with funds not collected within the program.

A copy of the House Committee letter is attached.

EC Letter to HHS on Risk Corridors – Sept 2016


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Photo of David Kaufman David Kaufman

David Kaufman is a Partner at Freeborn & Peters LLP, and he serves as a key member of the Firm’s Healthcare Practice Group.

David has practiced health law for more than 25 years, representing a range of entities responsible for ensuring cost effective and equitable access to healthcare, including health insurers, physicians groups, and regulators.

David has significant experience in federal and state-level regulatory and administrative law gained through private practice as well as in the public sector, serving as General Counsel to the New Mexico State Corporation Commission, Counsel to the New Mexico Superintendent of Insurance, and an Assistant Attorney General for the State of New Mexico.

Admitted to the state bars of New Mexico, New York, California, and Illinois, David’s prior experience in private practice includes work with national law firms in Chicago and Los Angeles, working on transactional healthcare matters and labor and employment issues, as well as Medicare and Medicaid reimbursement.

Before joining Freeborn, David served most recently as General Counsel for Blue Cross and Blue Shield of Illinois, where he was responsible for advising the company on regulatory and business issues in general and on the implementation of the Affordable Care Act.

Photo of Deborah Dorman-Rodriguez Deborah Dorman-Rodriguez

Deborah Dorman-Rodriguez is a Partner at Freeborn & Peters LLP, and is the leader of the Healthcare Practice Group.

Deborah has diverse experience as a healthcare attorney representing insurers, providers, and other healthcare entities. Most recently she served as the Senior Vice President, Chief Legal Officer, and Corporate Secretary at Chicago-based Health Care Service Corporation (HCSC), which operates BlueCross and BlueShield plans in Illinois, Montana, New Mexico, Oklahoma and Texas.

At HCSC Deborah was responsible for providing legal advice and consultation on such issues as federal and state regulatory implementations, litigation, mergers and acquisitions, corporate governance and compliance.  She oversaw HCSC’s legal strategy during a period of unprecedented turbulence in the healthcare industry and helped the company navigate the regulatory and business upheaval associated with the passage of the Affordable Care Act (ACA).

With her experience in serving as CLO of a large organization and in representing healthcare clients over the past 20 years, Deborah understands that no legal decision exists in a vacuum, and that it is vitally important to offer legal advice that is business focused, efficient, practical, and solution-oriented.

Before serving as HCSC’s Chief Legal Officer, Deborah was Vice President and General Counsel of Blue Cross and Blue Shield of New Mexico, an attorney with the law firm of Simons, Cuddy & Friedman in  Santa Fe, New Mexico, where she represented health insurers, physician groups, and other healthcare organizations, Special Counsel to the New Mexico Superintendent of Insurance, and a former New Mexico Assistant Attorney General specializing in health insurance and telecommunications regulatory issues.