Does Court Ruling Against Illinois Insurer Spell Trouble For Highmark?

Nov. 16--A federal court ruling against an Illinois insurer seeking payments under the Affordable Care Act's risk corridors program may raise doubts about the prospects of a similar lawsuit filed by Highmark that seeks nearly $223 million in compensation for losses from its ACA marketplace plans.

Late last week, Judge Charles F. Lettow of the U.S. Court of Federal Claims in Washington, D.C., ruled that the nonprofit Land of Lincoln Mutual Health Insurance Co. is not owed $75.8 million it sought from the federal government. The judge said the insurer's certification agreement to be a qualified health plan selling into the insurance marketplace did not constitute a binding contract.

Land of Lincoln had contended the U.S. Department of Health and Human Services owed the money to cover its losses from the marketplace, a key component of the Affordable Care Act meant to provide uninsured individuals affordable access to health insurance coverage regardless of their medical history.

Without those risk corridor payments, the Chicago-based company was liquidated Oct. 1, terminating coverage for its nearly 50,000 customers.

Pittsburgh-based insurer Highmark filed its suit in the U.S. Court of Federal Claims in May, arguing that the government's failure to make full payment under the risk corridors program violated the ACA mandate, was a breach of the insurer's agreement with HHS and violated the insurer's rights under the Fifth Amendment of the U.S. Constitution by taking property -- or the right to receive the payments -- without fair compensation.

On Tuesday, Highmark spokesman Leilyn Perri said the insurer's case is still pending and noted that Highmark has a different judge, adding, "We are making a different legal argument."

Risk corridors is a three-year program under the Affordable Care Act, ending after 2016, in which insurers that profited from their marketplace plans were slated to return some of that money to the federal government for redistribution to plans that lost money in the early years of the program.

The goal was to protect insurers from significant losses while the still-young marketplace stabilized. More insurers lost money than made money, though, so payments to companies that lost money were reduced on a pro-rated basis.

In Highmark's case, those payments amounted to about $28 million, covering only 12.6 percent of its 2014 losses. "We entered into a contract with the federal government and we certainly lived up to our portion of the contract," said Highmark CFO Karen Hanlon at the time of the May filing. "But unfortunately the government hasn't lived up to one of its programs -- the risk corridors."

Steve Twedt: [email protected] or 412-263-1963.

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