From the Portland Tribune:
Health Republic Insurance Company of Oregon, a Lake Oswego-based insurer that is phasing down its operations, on Wednesday filed a $5 billion class action lawsuit on behalf of insurers it says were shorted by the federal government under an Obamacare program.
The lawsuit, filed in the United States Court of Federal Claims, focuses on a program that was intended to offset insurer losses in the early years of the implementation of the Patient Protection and Affordable Care Act.
Instead, payments to insurers under the “risk corridor” program amounted to 12.6 percent of the amount expected for 2014, and are expected to be similarly low for 2015.
I figured these lawsuits were coming. As I’ve written before, I think insurers have a solid case.
I’ve got three questions. First, has the case been filed too soon? The risk corridor program is set to run for three years, and it can only pay out as much money as it takes in. Although payments came up short for 2014, CMS hopes to make insurers whole with the money it receives in 2015 and 2016. It doesn’t look like CMS will have enough cash on hand to do that, but you never know. The government may be able to argue that the case won’t be ripe for adjudication until we can say for sure.
Second, the case has been filed as a class action. If a class is certified—meaning that the courts say that this plaintiff can file suit on behalf of all the insurers who were stiffed—the federal government’s exposure is massive. But is this a viable class action? It’s true that “there are questions of law or fact common to the class,” as the law requires. But I don’t yet know whether dissimilarities between health plans—in particular, they’re all owed different amounts depending on how many low-income enrollees they’ve got—will thwart class certification.
Third, does the federal government have a duty to defend these lawsuits? After all, CMS wants to make these risk corridor payments and agrees that it’s obligated to pay insurers what they’re owed. It’s just that there’s no appropriation that allows for payment. Could the federal government confess that the plaintiffs are right? Or, better still, settle the case for the face value? Payment would then come from the Judgment Fund, a permanently appropriated pot of money to pay court judgments.
I don’t think the feds will do that yet, not while they can still argue that the claims are unripe. But if the case gets past the initial procedural hurdles, they’ll be sorely tempted to cut a deal. The Department of Justice, which will represent CMS, has an obligation to defend statutes from constitutional attack. But DOJ doesn’t have an obligation to fight tooth and claw when it agrees that claimants have a legitimate claim to an entitlement.
That’ll put DOJ into a political pickle. Agreeing to make risk corridor payments might make the White House happy. It might make CMS happy. It would certainly make insurers happy. But it’d royally piss off Congress. Stay tuned.