Health Reform WK-EDGE Court dismisses BCBS’s risk corridors case, deepening the divide
Thursday, April 27, 2017

Court dismisses BCBS’s risk corridors case, deepening the divide

An insurer’s attempt to recover full 2014 risk corridor payments was unsuccessful because neither the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) nor its implementing regulations imposed an annual deadline for making risk corridors payments in full. This decision underscores the discord within the Court of Federal Claims on the government’s obligation to make full risk corridor payments under the ACA (Blue Cross Blue Shield of North Carolina v. United States, April 18, 2017, Griggsby, L.).

Blue Cross and Blue Shield of North Carolina’s (BCBS) complaint alleged the following claims to recover the full amount of its 2014 risk corridors program payment: (1) violation of ACA Sec. 1342 and its implementing regulations by failing to make full, annual risk corridor payments; (2) breach of the qualified health plan (QHP) agreement between BCBS and the government; (3) breach of implied contracts; (4) breach of the covenant of good faith and fair dealing; and (5) improper taking in violation of the Fifth Amendment of the U.S. Constitution.

Keeping with precedent, the court found that it had subject matter jurisdiction to consider BCBS’s claims and that the claims were ripe (see, e.g., Land of Lincoln Mutual Insurance Co. v. United StatesNo. 16-744C, April 18, 2017; Illinois insurer has to wait for $72M in risk corridor payments, November 16, 2016). The court proceeded to find, however, that BCBS failed to state plausible claims for relief and dismissed all counts pursuant Fed. R. Civ. P. 12(b)(6).

Statutory claim. Finding Section 1342 and 45 C.F.R. Sec. 153.510 silent and, thus, ambiguous as to the timing of risk corridor payments, the court relied on a Risk Corridors and Budget Neutrality Bulletin from HHS dated April 11, 2014, which allowed the agency to make up any shortfalls during subsequent years of the program, as additional funds are collected. Given Congress’s broad delegation of authority to HHS to implement the program and the absence of a statutory deadline, HHS’s interpretation was reasonable. HHS is, therefore, under no obligation to pay the full amount of BCBS’s 2014 risk corridor payments until the agency completes its calculations for payments due for the final year of the program, which will not occur until December 2017 or January 2018.

Other claims. The breach of contract count was dismissed because the QHP agreement did not address annual risk corridor payments. The court similarly dismissed the implied-in-fact contract claim, based on Section 1342, 45 C.F.R. Sec. 153.510, and the government’s conduct before and after BCBS agreed to become a QHP for 2014; it is generally presumed that statutes do not vest contractual rights, and BCBS failed to show mutual intent to contract with respect to risk corridor payments. The takings count was dismissed because BCBS could not demonstrate that it had a cognizable property interest in full, annual risk corridor payments.

Other risk corridors cases. This decision is at odds with Moda Health Plan Inc. v. United States, which found in February on a motion for summary judgment that the insurer was entitled to full risk corridor payments for 2014 and 2015 (see Court is firm: insurer entitled to $214M risk corridor payment, February 15, 2017). The BCBS court did not cite Moda. On the other hand, Land of Lincoln, decided in November 2016, found it had jurisdiction but dismissed the case pursuant to Fed. R. Civ. P 12(b)(6)—an analysis that the Moda court criticized. Land of Lincoln is currently on appeal.

The case is No. 16-651C.

Attorneys: Lawrence S. Sher (Reed Smith LLP) for Blue Cross and Blue Shield of North Carolina. Charles Edward Canter, U.S. Department of Justice, for the United States.

Companies: Blue Cross and Blue Shield of North Carolina; United States of America

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