The government isn't handing over the money just yet. CMS says participants can't receive more than they paid into the program, no matter how big their losses.
Health insurance is a tough business, and some insurers who saw business potential in the Affordable Care Act are finding that their dreams aren't coming true. Requiring every American to buy insurance apparently is no guarantee that commercial insurers and co-ops will stay in the black.
The latest to cry foul and demand compensation from the government is Community Health Options, a health insurance cooperative in Lewiston, ME, that claims the government should hand over $22.9 million to offset its 2015 losses.
The co-op was profitable in 2014, its first year of operation, and it was the only ACA co-op to turn a profit that year. But then it reported a $31 million loss in 2015 and projects a $43 million loss for this year. The nonprofit co-op provides coverage in Maine and New Hampshire.
There are winners and losers in every industry, but under the ACA some insurers have a route for recouping some of their losses. The "risk corridors" program was included in the ACA as a way to help insurers manage costs, profits, and losses for the first few years of the law, and insurers in the red are saying the program should start writing some big checks.
In addition to CHO, several other insurers have sued the federal government for funds from the risk corridors program. They include big names, such as the Blue Cross and Blue Shield affiliate Highmark in Pittsburgh. Highmark is asking for $223 million.
The government isn't handing over the money just yet. The Centers for Medicare & Medicaid Services oversees the risk corridors program and has issued statements saying that participants can't receive more than they paid into the program.
Congress designed the risk corridors program so that in good times, insurers with lower costs pay a portion of their profits into the program, and in bad times insurers can receive payments to help offset their losses.
Budget-neutrality Not a Requirement, CHO Says
So CMS is likely to argue that CHO is only entitled to the $2 million it paid into the risk corridor program after making a $7 million profit in 2014. But when the CHO lawsuit was announced, CEO Kevin Lewis said the co-op should receive $22.9 million for its 2015 losses. That's a big disparity in expectations.
A written statement from Lewis indicates that the co-op leaders believe they were playing by the rules of the risk corridor program and that keeping the program budget-neutral was never a condition of participation.
"We at Health Options have followed the law and helped expand the Maine and New Hampshire markets and make them leaders in terms of individual coverage through the marketplace. It's important for the government to make good on its payment obligations."
Lewis is doing the right thing for his co-op, but it seems unlikely CMS is going to hand out the large sums that he and the other struggling insurers are demanding under the risk corridors program.
The ACA was not designed to underwrite the financial losses of insurers to this extent; the risk corridors program was only an acknowledgement that some insurers would struggle and need a boost until they could get better footing. It wasn't intended to make everyone whole again after a bad experience in the ACA marketplace.
If the government disappoints the insurers seeking large sums, health plan leaders are likely to remember that the next time the government promises to safeguard them from financial failure.