A shuttered Oregon co-op health plan filed a class-action lawsuit against the federal government last week, saying that it and other insurers are owed as much as $5 billion in risk corridor payments.
Health Republic Insurance Company of Oregon alleges that the government had no right to reduce risk corridor payments to qualified health plans operating on the federal exchange. That money could have helped it and other health plans stay open, said Stephen Swedlow, an attorney representing the insurer and a partner at Quinn Emanuel Urquhart & Sullivan.
So far, 12 of 23 co-ops created under the Affordable Care Act to offer affordable, high-quality health plans have closed. A number of non-co-op insurers offering plans on the exchange have struggled as well.
Under the ACA's risk corridor program, insurers offering plans on the federal exchange receive money from the government if their losses exceed a certain amount, and they must make payments to the government if their profits exceed a certain amount. The program is designed to limit insurers' risk during the early years of the exchange.
But Congress passed spending bills in 2015 and 2016 that prevented the CMS and HHS from giving underperforming plans their full risk corridor payments. For 2014, plans requested $2.87 billion in payments but paid only $362 million into the program.
“Some companies were unable to remedy the cash flow and/or reserve shortfalls, and, as a consequence, went out of business,” the Oregon co-op said in the lawsuit.
Kelly Crowe, CEO of the National Alliance of State Health Co-Ops, said in a statement that, “The marketplace was thrown into chaos when insurers received only 12.6% of expected risk corridor payments, with no clear understanding of how this promised money would be recouped in future years.”