Poor Obamacare. The Affordable Care Act (ACA) is reviled by conservatives for trampling individual's rights and disappoints liberals who think it doesn't go nearly far enough. Well, chalk up one more unhappy camper, health insurer Highmark Inc., which is suing the federal government for money it says it is owed.
Highmark is the insurance unit of Highmark Health, a nonprofit health insurance provider based in Pittsburgh. The controversy centers around "risk corridors," which are temporary programs to compensate ACA insurance providers who end up spending more in claims than the government projected. The first risk corridors were initiated in 2014. Specifically, Highmark claims it was shortchanged by the government to the tune of $196 million in risk-corridor payments.
Highmark has a sizable presence in the ACA Marketplaces in 3 states, but it is certainly not alone in suffering a shortfall in anticipated risk-corridor compensation. Although Highmark is a nonprofit, public companies will probably feel the wrath of shareholders and be pressured to file similar suits against the federal government. Highmark Health CEO David Holmberg sees the suit as a quest for justice.
Mr. Holmberg has good reason to be unhappy. His company lost $85 million in 2015 due principally to losses in its ACA insurance business. The company feels victimized by the Department of Health and Human Services (HHS), which last fall announced that the 2014 risk-corridor program would pay only 12.6 percent of the money claimed by insurers. Highmark wants 100 percent. A mouthpiece for HHS refused comment on the suit.
The suit was filed on May 17 in the Washington D.C.-based U.S. Court of Federal Claims. This court is no stranger to the controversy, as a similar suit was filed there in February by Health Republic Insurance Co. The Health Republic suit is looking to obtain class-action status. So far, the court has not ruled on the case.
Legal controversy has dogged the ACA over the 6 years since its passage. For example, a federal court ruled last week that the administration made a mistake by releasing certain ACA-related payments without getting permission from Congress. In another proceeding, the Supreme Court decided to punt and send back a case about contraception and religious freedom to a lower court.
Highland's legal argument is straightforward: The federal government made promises it should keep regarding reimbursements for ACA-related insurance losses. The insurer claims that U.S. officials had promised to make risk-corridor payments in full, even if it exceeded the amount collected from other health insurers to fund the corridors.
If it wins the suit, Highland stands to collect another $196 million. The company has already collected $27 million in risk corridor payments for 2014. The company is also looking to grab extra money for legal expenses and interest.
For its part, federal officials maintain that they want to keep risk-corridors "budget neutral" in that only the amount collected from insurers for the program would be paid out. For 2014, insurers requested $2.87 billion in risk-corridor reimbursements, but the government collected only $362 million from insurers. The feds indicate they will use future collections from insurers to "backfill" the 2014 shortfall.
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