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Health insurers, co-ops to meet in push for more lawsuits over ACA's risk adjustment program

Health insurance companies hit hard by the Affordable CareAct's risk adjustment program will meet on July 11, in a session designed, atleast in part, to encourage more insurers to sue the federal government.

The meeting is expected to draw about two dozenrepresentatives of small health insurers and consumer operated and orientedplans participating on the state exchanges, many of which face hefty paymentsinto the ACA's money-transfer mechanism. CHOICES, a coalition formed to lobbyfor changes to the risk adjustment program, is hosting the roundtable, saidMinuteman Health Inc.President and CEO Thomas Policelli, whose co-op is one of the group's originalseven members.

The meeting's primary goal is to walk attendees throughtheir legal and regulatory options for responding to the risk adjustmentcharges, Policelli and others familiar with the agenda said, in a bid tocoordinate a broader campaign. CHOICES members will argue that companies havea fiduciary obligation to policyholders to protect their respective assets,especially in the face of a risk adjustment program they believe unfairlypenalizes small and high-growth insurers.

That obligation pushed them as far as suing the federalgovernment over the program. CHOICES members hope to convince more companies tomimic Maryland co-op EvergreenHealth Cooperative Inc., which is the U.S. over allegationsthat the risk adjustment program's formula is flawed and biased. The company owes$24.2 million into the risk adjustment pool, equaling about 28% of its 2015premium revenue.

Evergreen Health President and CEO Peter Beilenson said in lateJune that 20 companies have asked him for a copy of his original complaint asthey weigh their potential legal responses. The co-op has since a preliminaryinjunction to delay paying its risk adjustment charge by the program's Aug. 15deadline.

The risk adjustment program contributed to the of at least 11 co-opsand small independent insurers in 2015; already in 2016 another two co-ops havebeen forced out of business. Connecticut regulators under supervision onJuly 5, in the process blaming federal health officials for ignoring warningsabout the impact of the risk adjustment program. will after learning it owedmore than $913,000 into the program.

Illinois co-op Land of Lincoln Mutual Health Insurance Co., which owes$31.8 million in risk adjustment payments, also faces potential closure,sources familiar with the matter said. And in New Jersey, is talking with state regulators abouthow its $46.3 million payment will affect its stability.

"We're not exactly sure," President and CEO RobertMeehan said in an interview, adding that the company is still discussing whyits obligation is so large. "Are we happy with [the risk adjustmentcharge]? Absolutely not. Do we fully understand it yet? No, we don't."

It is unclear whether Evergreen Health, or other insurersthat file similar lawsuits, will successfully challenge the federal government.University of Michigan law professor Nicholas Bagley panned Evergreen Health'sclaims in a June 14 blog post,saying there is little about the program's dynamics that crosses the legal lineof being "arbitrary and capricious."

The co-op's lawsuit also drew skepticism from ChrisCondeluci, a principal with CC Law & Policy who worked on the ACA while aRepublican Senate Finance Committee staffer. Since all the funds collectedthrough risk adjustment are funneled directly to other insurers within the samemarket, he said that the court would risk destabilizing the entire system byallowing even a single company to delay its payment.

"What does that do to [companies] that arguably have aright to money under this program?" he said in an interview."Everything falls out of kilter if you grant this injunction."

But those opposed to the risk adjustment program argue thatthe Centers for Medicare and Medicaid Services' to reforming the program in2018 represents a tacit admission that the mechanism is flawed. At minimum,they speculate that a wave of risk adjustment lawsuits could convince CMS toseek a quick settlement rather than fight litigation across the country.

Policelli declined to share a full list of the meeting'sexpected attendees. But past CHOICES meetings have included a cross-section ofco-ops, small insurers and new entrants from across the country. CHOICES now has 11 official members,including Evergreen Health, Land of Lincoln and HealthyCT. New Jersey'sFreelancers will monitor the meeting, Meehan said, though he may not personallybe in attendance.

High-profile startup Oscar Insurance Corp. is also among the severalunofficial participants that attend CHOICES-led discussions, sources at the meetingssaid. The company, which has yet to turn a profit in its short history, owes$32.9 million into the risk adjustment pool.