February 28, 2018

HHS removes risk corridors funding request from proposed budget

Daily Briefing

    HHS has revised a recent budget request so that it does not include funding for the Affordable Care Act's (ACA) risk corridors program, after health insurers suing HHS for payments under the program argued that the budget request strengthened their cases.

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    Background on ACA's risk corridors provision

    The ACA's risk corridors provision called for federal payments to health insurers to help offset the costs they might incur by enrolling a higher-than-expected number of sick people through the exchanges. Under the program, which launched in 2014 and ended in 2016, HHS was expected to reimburse a designated amount of insurers' losses on exchange plans. Companies with better-than-expected medical expenses were expected to help fund the program.

    However, the program faced a significant funding shortfall and CMS has been unable to reimburse insurers in full, prompting lawsuits from several insurers seeking their full payments. The Department of Justice (DOJ) has filed motions to dismiss some of the suits, claiming that the federal government was not obligated to make the payments because although the ACA authorized CMS to make risk corridors payments to insurers, Congress later limited federal funding for the initiative. Federal courts have issued conflicting rulings on whether the federal government is required to make the risk corridors payments.

    HHS revises budget request for risk corridors funding

    According to Becker's Hospital Review, HHS in a budget proposal released Feb. 12 requested about $11.5 billion in mandatory funding for the risk corridors program, as well as $812 million to potentially cover the costs of exempting the program from sequester.

    Following the proposal's release, Land of Lincoln Health and Moda Health—two insurers that are suing HHS over unpaid risk corridors funds—filed court documents claiming that HHS' budget request countered DOJ's arguments that the federal government is not required make the risk corridors payments.

    However, HHS then released a revised budget request on Feb. 19 that no longer included the risk corridors funding. DOJ in a letter sent Feb. 20 to the U.S. Court of Appeals for the Federal Circuit wrote that the risk corridors funding had been included in the budget proposal because of an accounting error. "That budget document reflected an accounting treatment that was used by the agency during the initial administration of the risk-corridors program," DOJ wrote, adding, "The program periods for collecting funds have concluded and HHS has made accounting adjustments to reflect that termination."

    But an attorney for Moda Health in a letter sent Wednesday to the U.S. Court of Appeals for the Federal Circuit wrote that HHS' revised "budget appears to have been hastily rewritten simply to reflect the government's litigation position in this case."

    According to Modern Healthcare, President Trump's fiscal year 2019 budget proposal still includes mandatory funding for the risk corridors program (Livingston, Modern Healthcare, 2/22; Haefner, Becker's Hospital Review, 2/23; Morse, Healthcare Finance News, 2/23).

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