On the day of Tuesday, Blue Cross Blue Shield (BCBS) affiliates in Alabama and Tennessee sued the federal government in the Court of Federal Claims, saying they are owed a total of about $240 million under the risk corridor payments of Affordable Care Act that the government is required to pay.
Since the risk corridor payments started in the year of 2014, the U.S. Department of Health and Human Services has repeatedly said the ACA needs it to pay certain insurers in full as part of the program, Blue Cross stated. The two almost identical complaints claim that the affiliates have barely been paid what they are owed for the 1st year, much less what they are owed since then.
A number of other insurers have sued the federal government for its failure to make the payments, and some have been victorious.
In theory, the program gathers money paid into it by insurers who make a certain amount of money from the ACA exchanges, and then distributes those funds to any insurers who’ve lost a certain amount of money offering plans on the exchanges. In this way, it targeted to motivate insurers to offer insurance plans at lower premiums during the first 3 years of the ACA marketplaces.
“The risk corridor payments was designed for issuers to share with the government the financial risk of offering [qualified health plans] in the new marketplaces,” Blue Cross stated. “The effectiveness of the risk corridors program necessitates that the government and participating health insurance issuers share financial risk on an yearly basis.”
In the year of 2014, profitable insurers paid $362 million into the program, but that was not almost enough to cover the $2.87 billion in compensation that insurers who lost money sought from the government. Blue Cross of Alabama and Blue Cross of Tennessee both lost money and inquired for $355,000 and $78.7 million from the government that year.
The following year, Blue Cross of Alabama sought a total of $89.8 million — $79.5 million from losses incurred in the individual market and $10.3 million from the small group market — and Blue Cross of Tennessee inquired for $83.2 million.
For the year of 2014, HHS prorated the $362 million across the $2.87 billion that was sought across the board, and claimed that it would pay the 2 affiliates 12.6% of what they had asked for, while forcing the rest off to be paid in the year of 2015, Blue Cross said.
This year, the government said all risk corridors funds collected in the year of 2015 would go toward the left over 2014 payments. Blue Cross of Alabama learned it would be paid about $12,000 of the almost $300,000 it was still owed for 2014 year, and would not get any of the money it was owed for 2015. Blue Cross of Tennessee, meanwhile, was told it would get $2.6 million of the $68 million it was owed for 2014 and similarly, none of the requested amount for 2015.
In refusing to completely compensate them, the Blue Cross affiliates say the government breached the statutory and regulatory mandates to make the risk corridor payments and breached an implied contract. They need the government to pay them a total of about $240 million, plus interest and any other damages.
The federal government doesn’t comment on pending litigation.
Blue Cross is represented by Leslie B. Kiernan and Robert K. Huffman of Akin Gump Strauss Hauer & Feld LLP.
Counsel information for the government was unavailable on the day of Wednesday.
The cases are Blue Cross and Blue Shield of Alabama v. The USA, case number 1:17-cv-00347, and BlueCross BlueShield of Tennessee Inc. v. The United States of America, case number 1:17-cv-00348, both in the U.S. Court of Federal Claims.
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