Another Challenge to U.S. on Risk Corridor Payments

Molina Healthcare has joined the long line of insurers suing the government for failure to honor its obligations under the Affordable Care Act’s “risk corridor” program.  According to Molina’s 84-page complaint filed Jan. 23, the U.S. owes it a whopping $52.3 million.

Enacted in 2010, the Affordable Care Act (ACA) guaranteed availability of health insurance to all Americans, in part by prohibiting Qualified Health Plans (QHPs) from denying coverage for, or basing premiums on, preexisting conditions or certain other traditional risk factors.  To address the resulting uncertainty in the market, the ACA established a three-year “risk corridor” program.  Basically, the program provided that for each of 2014, 2015, and 2016, if  premium receipts exceeded medical expenses by a target amount, the QHP would pay the government the excess; if premium receipts fell short of the target, the government would pay the QHP the shortfall.

Molina, like 15 other insurers, is suing the government for allegedly reneging on risk corridor commitments in two basic ways: (1) promising to pay the plans annually but then saying it would wait until 2017, after the three-year program ends, and (2) promising to compensate them fully for their losses but then saying that it would pay in a “budget-neutral” manner.

“Budget-neutral” means the government would limit its total payments to the aggregate payments it received under the program.  How much would that diminish payments to QHPs?  Molina quotes HHS as saying that for 2014, QHPs would receive only 12.6% of the amount they would have received without budget neutrality.

Without using the term, Molina’s complaint tells a “bait and switch” story of the government enticing insurers to sign up as QHPs and then changing the rules.  The complaint lists counts for Violation of Federal Statute and Regulation, Breach of Express Contract, Breach of Implied-in-Fact Contract, Breach of Implied Covenant of Good Faith and Fair Dealing, and Taking Without Just Compensation in Violation of the Fifth Amendment.

The case is Molina Healthcare v. United States, No. 1:17-cv-00097 (Fed. Cl.).

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