House Republicans are concerned the Obama administration is open to settling insurer lawsuits over risk corridor payments, saying the program must remain budget neutral.
The suits cannot be settled using federal funds, they argue in a letter to the Obama administration. House leaders are wary settlements would be financed by permanent appropriations for judgments, or the “judgment fund,” according to the letter.
Among others, Highmark sued the federal government demanding $223 million in risk corridor payments after receiving just $27 million from the risk corridor program. In another lawsuit, Blue Cross Blue Shield of North Carolina alleged that it is entitled to $147 million from the program.
The risk corridor program promised to pay insurers $2.5 billion for the 2014 benefits year, but was able to disburse just 12.6 percent of this sum.
In the letter, House Republicans expressed fears that federal funds were being illegally deployed to help insurers recover losses on marketplace products. Centers for Medicare & Medicaid Services Acting Administrator Andy Slavitt said in a subcommittee hearing last week that the federal government has an obligation to make such payments.
CMS wrote in its memo to insurers, “we know that a number of issuers have sued in federal court seeking to obtain the risk corridors amounts that have not been paid to date,” adding “as in all cases where there is litigation risk, we are open to discussing resolution of those claims.” In the past, CMS has said it will seek ways to make up for the shortfall.
Conservative lobby group Freedom Partners launched a campaign last week to ensure that the risk corridor and reinsurance programs end as planned in 2016. In a memo, the group accused the Obama administration and payers of engaging in a “quiet lobbying campaign to secure taxpayer-funded bailouts for insurers operating on the public exchanges.”