At least one major health insurer is giving up hope that it will ever be able to collect all of the funds it is owed through the Affordable Care Act’s risk corridor program.
Humana will write off nearly all of the $591 million it is owed through the program, the insurer announced late last week. The company previously collected $30 million in risk corridor payments from the Centers for Medicare & Medicaid Services for the 2014 plan year, and anticipated getting another $8 million toward outstanding 2014 receivables.
The risk corridor program aims to shield insurers from the financial risk associated with operating in the individual marketplaces by essentially collecting funds from better-performing plans and reimbursing lower-performing ones. But it has been fraught with controversy since CMS announced it would be able to pay insurers less than 13% of what they were owed for the 2014 benefit year, due to a provision that requires the program to be budget-neutral.
Several insurers have since sued the government seeking to compel it to deliver promised receivables.
Humana’s decision to write off the hundreds of millions it is still owed came after the U.S. Court of Federal Claims dismissed Land of Lincoln Mutual Health Insurance Company’s lawsuit to recoup outstanding risk corridor payments. Given that ruling (PDF), Humana’s “conclusion with respect to the ultimate collectability of the receivable has shifted, and accounting rules require that the receivable be written off,” the announcement noted.
Because of the risk corridor receivables write-off and newly disclosed “transaction and integration costs” likely tied to the pending merger with Aetna, Humana adjusted its year-end earnings per share estimate to $6.09, down from the $8.68 per share it estimated as of Nov. 4.
But since the risk corridor program expires at the end of this year, Humana noted that the receivables write-off isn’t expected to affect its performance in 2017.