Humana has filed a lawsuit against the federal government seeking more than $611 million in unpaid funds from the Affordable Care Act’s risk corridor program.
Humana, which late last year announced that it would write off nearly all of the risk corridor money it was owed, is now seeking $205.2 million for the 2014 benefit year, $214.5 million for 2015 and $191.4 for 2016.
Failing to provide timely payments of those funds, Humana argues in its complaint (PDF), violates the ACA and has harmed the insurer.
Humana is not the only insurer to contend with significant shortfalls in the amount they were supposed to receive from the risk corridor program—or to hit back with a lawsuit. The results of those cases have been mixed—for example, Moda Health won its suit seeking $214 million in back payments, but a different judge dismissed Blue Cross Blue Shield of North Carolina's case.
The government has not been able to pay insurers what they’re owed because of a provision tucked into a previous omnibus spending bill, which says payments cannot exceed the amounts collected from other insurers.
Humana to sell long-term care insurance business
On Monday, Humana announced that it will sell the stock of its wholly owned subsidiary KMG America Corporation, which includes its closed block of commercial long-term care insurance policies that serve about 30,100 policyholders.
Texas-based Continental General Insurance Company will buy the asset from Humana, which says it expects a net loss of approximately $400 million—or $2.75 per diluted common share—associated with the sale.
Leerink Partners analyst Ana Gupte said in a research note that she sees the sale as a positive, given that KMG was always “strategically misaligned” with Humana’s core business. It could also be a precursor to the sale of Humana, she suggested, which could be “the managed care sleeper story of 2017.”