The Buzz

Revealed: The $5 Billion Obamacare Problem

One of the more than twenty failed or struggling “consumer-oriented” insurers created by Obamacare is suing the U.S. government for as much as $5 billion in payments it claims are owed to itself and other insurers.

Health Republic Insurance of Oregon filed a class action complaint in the U.S. Court of Federal Claims in Washington, D.C., seeking $2.5 billion.

Dawn Bonder, CEO of Health Republic, told the Portland Business Journal the company hopes to win as much as $5 billion for insurers.

Health Republic, which closed its doors at the end of 2015, attributed its demise to an announcement from the Department of Health and Human Services in October that Obamacare’s “risk corridor program” would pay a prorated rate of 12.6 percent of the funds insurance companies requested and expected to receive in 2014.

“The government’s failure to satisfy its monetary obligations and make its required risk corridor payments will have wide-reaching effects on millions of Americans in the form of restricted health plans and higher insurance premiums,” the lawsuit, filed February 24, says.

The Affordable Care Act, colloquially known as Obamacare, provided for nonprofit, consumer-operated and oriented entities—dubbed “co-ops”—to make affordable health care available.

Health Republic of Oregon is one of the twenty-three originally created. The government loaned $2.4 billion to them, but twenty-two lost money in 2014, and twelve, including Health Republic, have shuttered since.

As The Daily Signal has reported that at least six of the twenty-two struggling or closed organizations pointed to lower than expected risk corridor payments as a reason for their flopping.

“The problem that you have here is, some insurers basically counted on this money, and the others didn’t,” Ed Haislmaier, a senior research fellow in health policy studies at The Heritage Foundation, told The Daily Signal. “That’s why half of the co-ops are still with us.”

The Affordable Care Act designed a temporary risk corridor program to run from 2014 to 2016. It was to help entice insurance companies to participate by acting as a safety net and cutting the risk associated with insurers entering Obamacare’s health care marketplace, or exchange.

The Centers for Medicare and Medicaid Services, which oversees implementation of Obamacare, paid insurers $362 million of $2.87 billion requested through the program for 2014.

The insurance companies say they didn’t receive over $2.5 billion in requested funds.

Health Republic filed the class action against the U.S. government, acting through the Centers for Medicare and Medicaid Services and its parent agency, the Department of Health and Human Services.

Health Republic determined that it is owed $7.1 million under the risk corridor program. It estimated that it will be owed about $15 million in payments for 2015, with the exact amount to be determined later this year.

The lawsuit seeks, on behalf of Health Republic and similarly situated insurers, immediate payment in full for 2014 and for 2015 as soon as the amount is finalized. Other issuers and insurers also could benefit financially.

“Health Republic did exactly what we were asked to do under the ACA [Affordable Care Act]: We designed and priced our plans for the market we hoped would materialize, not for the market we feared would materialize,” Bonder said in a prepared statement, the Portland Tribune reported. She added:

“Like every health insurer in the post-ACA market, we knew the costs of this new population could be astronomical, but we couldn’t be sure until we learned who purchased our plans and analyzed their medical costs under the new ACA plans. Without the risk-sharing provisions in the ACA, especially [the] risk corridor, we, along with every other health insurer across the nation, would have been forced to think long and hard about how to proceed in these new uncharted waters created by the ACA. It is unconscionable for the government to default on their obligation to pay the risk corridor amounts owed in a timely manner.”

Health Republic of Oregon received $60.6 million in taxpayer-backed start-up loans before it began providing health insurance coverage in 2014.

Pages