A Lewiston-based health insurance co-op is suing the federal government, claiming it is owed $22.9 million to offset losses it suffered in 2015.
Community Health Options made money in 2014, the year it began operations, but reported a loss of $31 million in 2015 and has set aside $43 million in reserves for potential losses this year. The nonprofit cooperative is designed to provide consumers with insurance coverage options under the Affordable Care Act. It operates primarily in Maine, although some of its 80,000 customers are in New Hampshire.
The suit alleges that the federal government owes the co-op money under the temporary “risk corridors” program, which is designed to help insurers manage costs, profits and losses for the first few years of the ACA. Insurers that have lower-than-expected costs pay a portion of their profits into the program, while insurers that experience higher-than-anticipated costs receive payments to help offset their losses.
CHO paid $2 million into the risk corridor program in 2014, when it had a profit of $7 million, but it has received nothing under the program for the costs it incurred in 2015, said Kevin Lewis, chief executive officer of the cooperative. The $22.9 million it is seeking is based on its 2015 losses, not what it contributed to the risk corridors program in 2014.
Other insurers also have sued the federal Department of Health and Human Services over the risk corridors program, claiming they are owed money for higher costs. Lewis said CHO believes it needs to protect its interests, and it filed suit Monday in federal court.
“We at Health Options have followed the law and helped expand the Maine and New Hampshire markets and make them leaders in terms of individual coverage through the marketplace,” Lewis said in a written statement. “It’s important for the government to make good on its payment obligations.”
At least five other insurers have sued the federal government over risk corridor payments. The largest was filed in May by Highmark, a Blue Cross and Blue Shield affiliate in Pittsburgh, which said it is owed at least $223 million under the program.
The Centers for Medicare and Medicaid Services, which oversees the health insurance program for the DHHS, did not respond to a request for comment Wednesday. Previously, it has argued that the risk corridors program is intended to be budget-neutral, with payouts being limited by the amount paid in, without additional federal funds being used. If payments into the program are reduced, the agency has said, payouts also will be reduced.
“They will argue that it’s budget-neutral, but there’s no basis for them doing so,” Lewis said Wednesday, asserting that the law doesn’t support that contention.
Emily Brostek, executive director of Maine-based Consumers for Affordable Health Care, said the risk corridors program is key to helping insurers make the transition to the ACA, and it’s particularly important for maintaining the financial viability of the co-ops.
“The co-ops are intended to provide people with other options, and we’ve seen in Maine how much people want that option,” she said.
CHO was the only cooperative formed after the health insurance law went into effect to turn a profit in 2014 – in fact, half of the nearly two dozen that were set up went out of business. But after signing up more customers, CHO’s finances went downhill in 2015. The losses gathered momentum, particularly during the latter half of last year, after customers met out-of-pocket limits and CHO was forced to pick up more of its customers’ health care costs.
CHO was ordered to stop taking on new individual coverage customers in late 2015, and the Maine Bureau of Insurance sought to put the co-op into receivership in order to cut thousands of customers from its rolls as a way to control costs. The Centers for Medicare and Medicaid Services blocked that move, saying that a key component of the ACA is a guarantee that customers’ policies can be renewed.
The bureau has had the company under enhanced scrutiny this year, requiring monthly updates on CHO’s finances. The bureau has found that the co-op’s losses have grown in recent months, but the year-to-date results are in line with the financial plan that CHO filed with the bureau.
The next update, a report on quarterly results for the April-June period, is expected to be filed in the next few days.
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