A federal appeals court has ruled that Evergreen Health Cooperative must pay its $24.2 million Affordable Care Act risk-adjustment payment while it challenges the payment methodology.
In a brief order, the 4th U.S. Circuit Court of Appeals rejected Evergreen Health's request to delay the risk-adjustment payment and gave no explanation for the reasoning. Evergreen Health sought the court's input after a Maryland federal judge similarly refused to grant the delay.
Evergreen Health challenged the risk-adjustment payment methodology in Maryland federal court in June. In its appeal to the 4th Circuit, the co-op said it would be placed in receivership by the Maryland Insurance Administration and put out of business if payment was due before Oct. 31.
Matt Jablow, a spokesman for the co-op, said the company wouldn't comment on the lawsuit, but it is “well down the road” toward pursuing outside financing.
“We're optimistic that we'll secure it and be able to make the risk-adjustment payment,” Jablow said.
Evergreen Health, which was started in 2014, serves approximately 39,000 consumers in Maryland. The company said in court filings that the risk-adjustment payment owed to the CMS represents approximately 28.4% of its premium revenue for 2015 and it wouldn't be able to meet its risk-based capital requirements if it paid the sum.
The federal government fought Evergreen Health's efforts to postpone the payment, noting the co-op failed to challenge the risk-adjustment methodology when it was adopted and that Congress has declined to exempt co-ops and other small insurers from the risk-adjustment program.
“The department's chosen methodology is a reasonable approach to a complex actuarial challenge,” HHS said in a filing to the 4th Circuit.
Most of the insurance co-ops that sprang up under the ACA have folded, and many small insurers have claimed they've been burdened by massive risk-adjustment payments that fail to consider that their small customer bases will generally look healthier than large legacy carrier populations.
