HHS’ three-year, budget-neutral approach to the risk corridor program is reasonable according to the U.S. Court of Federal Claims. The court held that it must defer to HHS’ interpretation of Section 1342 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) because the agency’s decision to administer the ACA’s risk corridors in a budget neutral manner over the three-year life of the program, rather than annually, was reasonable in light of ambiguity and the lack of an appropriation for the program. Accordingly, the court dismissed the claims of Land of Lincoln Mutual Health Insurance Company (Lincoln) asserting that HHS was not obligated to pay the entirety of risk corridor payments owed to qualifying health plans (QHPs) on an annual basis (Land of Lincoln Mutual Health Insurance Company v. U.S., November 10, 2016, Lettow, C.).
Risk corridor. In order to mitigate the uncertainty surrounding health reform, under 42 U.S.C. § 18062, the ACA developed a temporary risk corridor program for calendar years (CYs) 2014, 2015, and 2016, where issuers of qualifying health plans (QHPs) participating in exchanges pay money to or receive money from HHS depending upon the issuer’s ratio of premiums received to claimed costs. The program was designed to even out losses and gains of QHPs.
Lincoln. Lincoln sold QHPs on the Illinois marketplace in 2014 and 2015 and incurred losses in those years making Lincoln eligible to receive payments under the risk corridor program. HHS paid Lincoln 12.6 percent of the amount the insurer was due for 2014 and nothing for 2015. Because the overall risk corridor payments owed by HHS exceed the fees received by HHS under the program, HHS stated that it would operate in a budget neutral manner and only make payments from available fees. Lincoln filed a complaint asserting a statutory and regulatory entitlement to the outstanding 2014 and 2015 payments, totaling $72,859,053. Lincoln also requested expedited disposition of the case, noting, without the funds, it would lack the funds to survive and the health insurance it was providing to the citizens of Illinois would have to be canceled.
Section 1342. While Lincoln asserted that Section 1342 requires full annual payment under the risk corridor program, the government contended that payments are not due until the end of the program, depending on the availability of funds. Additionally, Lincoln asserted that the statute requires "payments out" to participants in the risk corridor program, even if those payments exceed the "payments in" under the program.
Reasonable. The court held HHS’ approach to the law was not unreasonable, in light of the fact that the statute and regulations were ambiguous as to HHS’ payment obligations under the risk corridor program. The court also noted because HHS acknowledged its obligation to eventually pay QHPs the amounts owed and because no annual appropriation was provided for the program, it was reasonable for the agency to operate the program in a budget neutral manner over a three-year period. The court also held that Lincoln failed to establish the existence of an express or implied contract mandating the risk corridor payments.
The case is No. 16-744C.
Attorneys: Daniel P. Albers (Barnes & Thornburg LLP) for Land of Lincoln Mutual Health Insurance Co. Terrance A. Mebane, U.S. Department of Justice, for the United States.
Companies: Land of Lincoln Mutual Health Insurance Co.
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