Two more CO-OPs sue over risk adjustment program

Ramping up the controversy surrounding the Affordable Care Act’s risk adjustment program, two more health insurers have sued the federal government over what they see is a flawed formula that unfairly penalizes smaller carriers.

One consumer operated and oriented plan (CO-OP), New Mexico Health Connections, alleges in its suit that the risk adjustment program was implemented in a way that “brutally penalizes new, innovative, low-cost insurance companies and flouts Congress’ intent in enacting the ACA.”

Minuteman Health, a Massachusetts CO-OP, makes a similar argument in its complaint, saying the risk adjustment program illegally penalizes insurers with lower premiums, leading some plans to shut down and others “teetering on the brink of insolvency” because large assessments wiped out their cash reserves.

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"Congress directed CMS to transfer funds between insurers based on the health status of their members," Minuteman CEO Tom Policelli said in a statement. "Instead, CMS created a program that rewards expensive insurance companies who cater to consumers buying expensive products. CMS penalizes innovative, lower-premium carriers whose mission is to provide products to price-sensitive consumers.”

A spokeswoman from CMS declined FierceHealthPayer's request for comment on the litigation.

Both complaints follow in the footsteps of a suit filed in June by Evergreen Health, which pointed out that the Maryland-based CO-OP is slated to pay 26 percent of its 2015 premium revenue to the risk adjustment program, while the much larger CareFirst BlueCross BlueShield stands to receive a windfall in payments.

Evergreen’s CEO, Peter Beilenson, told FierceHealthPayer that to ensure the solvency of small insurers, the Obama administration must alter the risk adjustment program before 2018. A section of a recent federal rule, he noted, seems to be “sympathetic” to smaller carriers’ concerns about the program.

On Monday, though, a federal judge ruled that Evergreen cannot stop payment to the risk adjustment program while its litigation plays out, the Wall Street Journal reports.

- here’s Minuteman Health’s lawsuit
- read its statement
- check out New Mexico Health Connections’ suit
- read the WSJ article

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