The Department of Justice is arguing that the proposal to fully fund the Affordable Care Act's risk corridor program included in HHS' budget was the result of an accounting error, and the language has been scrubbed from an updated HHS budget dated Feb. 19. The initial proposal to fully fund the risk corridors surprised stakeholders and resulted in strong backlash from several conservatives including Sen. Marco Rubio (R-FL) who has long opposed the program. The budget language also spurred at least two issuers who are suing the administration over the program to point out that HHS' budget proposal is inconsistent with the DOJ's argument that the federal government is not obligated to make the payments.
The ACA's risk corridor program ran from 2014 to 2016 and was designed to protect issuers from mispricing in the initial years of the exchanges. Under the program, plans that earned more than 3 percent of premium revenue were required to pay into a pool that would be redistributed to plans that lost more than 3 percent.
There is controversy over whether Congress initially envisioned the program to be budget neutral, meaning that the agency would be able to use the funding collected from plans to make payments to others. Regardless, Rubio and others effectively ensured that it would be zero sum by attaching a rider to appropriations legislation that banned CMS from using other funding sources.
As a result, the funding pool fell significantly short of plans' reimbursement requests. Many plans, especially smaller issuers or the health care co-ops created under the ACA, attributed the risk corridor shortfall to their inability to stay afloat in the exchanges, and dozens have sued the administration with varying results.
The federal government's defense of its actions has also changed. Issuers first filed suit against the Obama administration in 2015. The DOJ initially said that the cases should be dismissed because the program had not yet ended. But in a fall 2016 filing, the DOJ took a much harder stance and begin arguing that the risk corridor statute “only entitled QHP insurers to payments equal to the amounts collected,” health expert Tim Jost wrote in Health Affairs on Oct. 4, 2016.
The Trump administration continues to take that legal stance.
However, HHS' budget request released Feb. 12 appeared to upend that argument by including language requesting a legislative proposal to fully fund the risk corridor program via a mandatory appropriation of about $11.5 billion, and another $812 million that a source says would presumably cover the cost of exempting the program from sequester. Issuers are owed a total of $12.3 billion.
Attorneys from two of the issuers involved in lawsuits over the risk corridors -- Moda and Land of Lincoln - wrote to the Federal Court of Claims on Friday (Feb. 16) to point out that the budget is inconsistent with the DOJ's argument that the government is not statutorily required to make disbursements above what the agency had collected.
The issuers had initially received opposite rulings, with one judge dismissing Land of Lincoln's case and another calling on the government to pay Moda. Both of the cases have been appealed, and oral arguments were heard on Jan. 10.
On Monday (Feb. 19), the Department of Justice responded to the issuers in a court filing. “That budget document reflected an accounting treatment that was used by the agency during the initial administration of the risk-corridors program. The program periods for collecting funds have concluded and HHS has made accounting adjustments to reflect that termination. These accounting adjustments reflect that it does not have unfunded obligations under the program, and HHS’ Budget in Brief has been adjusted to reflect that,” the DOJ wrote.
The DOJ also provided a link to the revised budget, which includes only one line on risk corridors that refers to $98 million in collections for 2017, $25 million for 2018 and $0 in 2019.
HHS made a similar comment when asked about the revised budget.
“There has been no change in the administration’s position regarding the litigation related to risk corridor payments under the ACA. Now that the program periods for collecting funds have concluded, HHS has updated its accounting of the risk corridor program to reflect the fact that there is no obligation to make payments beyond the amounts collected from insurers under the program,” a spokesperson said.
HHS is silent as to how the initial language ended up in the Feb. 12 budget.
Mike Adelberg, a former CMS official now with FaegreBD says he imagines there was a “spirited discussion within the Humphry building regarding the now-dropped risk corridors content.”
But ultimately the budget language may not effect the case. “I would be very surprised if the inclusion or excision of the money from the budget documents will make a difference either way,” Jost told IHP. “The federal government’s position has been clear all along (or at least since 2016) and funding showing up briefly in a budget document does not prove a change in position, especially since the funding has now been deleted.”
HHS did not respond to a query on whether other parts of the budget will also be revised. -- Amy Lotven (alotven@iwpnews.com)