$5B suit filed against the U.S. for promised risk corridor amounts

Health Republic Insurance (Health Republic) is suing the U.S. government for $5 billion and seeks to represent a class of insurance companies who did not receive risk-sharing payments they were owed. Section 1342 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) created the risk corridor program to ensure that issuers of qualified health plans (QHPs) on health insurance marketplaces would not lose a substantial amount of money when extending coverage to consumers with high rates of utilization and high health costs. Health Republic alleged that the government failed to pay out on its contractual obligations, causing insurance companies to lose billions.

Pennies on the dollar

CMS announced on October 1, 2015, that insurers would be paid about 12.6 percent of the risk corridor payments requested (see Risk corridor payments will be made or become U.S. obligations, Health Reform WK-EDGE, November 24, 2015). Health Republic states that the ACA and implementing regulations were clear about the government’s requirement to pay a defined amount of QHP losses that exceed certain parameters, but that Congress prohibited CMS and HHS from paying risk corridor amounts from their appropriated funds. This resulted in cash flow problems for insurance companies, some of which, like Health Republic, went out of business.

Health Republic requested full payment of the risk corridor payments under the ACA to all insurance companies owed, totaling about $2.5 billion each year for 2014 and 2015. Health Republic stated that it was owed about $7 million under the program for 2014, and about $15 million for 2015, and that UnitedHealth Group, Anthem, and Aetna all reported that their health insurance exchange business was unprofitable. Health Republic brought the suit as a class action, and stated that there are hundreds of class members similarly situated.