Blue Cross Blue Shield of North Carolina has filed a suit in the U.S. Court of Federal Claims in Washington, D.C., claiming that the federal government reneged on its deal to pay the insurer over $147 million under the Affordable Care Act’s (ACA’s) “risk corridor” program.
The risk corridor program was designed to help insurers mitigate the pricing risk they face when taking in high-risk enrollees; it is a subsidy program that covers for insurers if their losses exceed a certain amount.
According to the suit, the federal government violated the language of the health law and a contractual obligation to the insurer. The federal government’s plan to backfill the payments owed for 2014 over time “is contrary to the nature, purpose, intent and language” of the law, the insurer said in the suit.
A similar suit was filed last month by Highmark Health’s insurance unit. In February, Health Republic also filed a comparable suit, which is looking to attain class-action status.
Blue Cross and Blue Shield of North Carolina asserted that it lost over $400 million on ACA products in 2014 and 2015, reported the Wall Street Journal. The insurer also claimed that the risk corridor payment deficit added to its losses.
Last fall, the Department of Health and Human Services announced that insurers would initially receive only 12.6% of the money they claimed under the risk corridor program for 2014. Federal officials reassured, however, that insurers would receive more later on. Despite the promise of payment, the amount owed by the program was far greater than the sum it had collected from participating insurers.
The suit filed by Blue Cross said that federal officials initially declared that payments would be made despite the risk corridor’s lack of funding, but a later statement said the program would be “budget neutral”—a stance Congress supported in a 2014 spending bill.
On top of the more than $147 million it is owed as damages, the North Carolina insurer is seeking interest and legal expenses. Blue Cross disregarded the amount it has been paid so far--$18 million—as part of the damages.
Blue Cross also wants the court to force the federal government to make payments related to the risk corridor when they are due for in later years. The insurer had estimated that it will be owed over $175 million for 2015.
