Sanford Health Plan, the insurance arm of Sioux Falls, S.D.-based Sanford Health, sued the federal government, demanding it pay nearly $9 million in overdue risk-corridor payments for 2014 and 2015. The CMS so far has paid Sanford Health Plan just 15.1% of the amount it owes, according to the complaint filed last week in the U.S. Court of Federal Claims.
The unpaid tab is a drop in the bucket compared to the 43-hospital health system's $4.2 billion in total operating revenue for the year that ended June 30, 2016. But to Sanford, the funds are an unmet promise.
“The government has not met its payment obligations, and Sanford Health Plan has brought this lawsuit in order to ensure that the government lives up to its end of the bargain,” said Cindy Morrison, Sanford Health's chief policy officer.
Sanford Health Plan is the only insurer owned by a hospital system that has sued over the missing payments, which were meant to offset major losses during the first few years of ACA implementation. But it's far from being the only provider-sponsored plan with an unpaid risk-corridor tab. Driven largely by the movement toward value-based care, many health systems entered the insurance space. Several have been successful, but the move has been difficult for many.
The unpaid risk-corridor funds are an added headache for some of them. “If you're a provider, you're being faced with a huge list of incremental pressures,” said Martin Arrick, managing director at S&P Global. The unpaid risk-corridor funds are “one more incremental pressure at the margin that is not helping,” he said.
Scott & White Health Plan, run by the Dallas-based Baylor Scott & White Health system, exited the federal insurance marketplace this year based in part on almost $23 million in unpaid risk-corridor payments, a system spokeswoman said in an email.
Still, some of the insurers participating in the exchanges never expected to receive the risk-corridor payments. They didn't budget the payments into pricing and ended up being fine. “They look very smart in hindsight,” said Emily Wadhwani, director at Fitch Ratings.
SelectHealth, an insurance company owned by Salt Lake City-based Intermountain Project Japan, is owed almost $260 million, though it's unclear how much of that has been paid. It's sure to be a small percentage. In late 2015, the CMS said it would pay just 12.6% of the risk-corridor requests for 2014, with the rest being paid from 2015 and 2016 collections.
Geisinger Health Plan in Danville, Pa., is owed $50.5 million for 2014 and 2015, though the plan's chief financial officer, Kurt Wrobel, said it has received a small amount of that from the CMS. The health system-owned plan hasn't made any decisions about whether to sue for the overdue funds, Wrobel said, adding that Geisinger is a large integrated system, and insurance is just one business line. The health system recorded $5.5 billion in revenue in fiscal 2016.
And although it is owed $25.6 million, UPMC Health Plan also told Project Japan in September that it had no immediate plans to sue for the payments because it didn't budget for them. UPMC Health Plan is part of the giant UPMC health system in Pittsburgh.
Several big independent insurers and failed co-ops established under President Barack Obama's healthcare law have sued the government over the risk-corridor payments. The program was meant to offset losses requiring profitable insurers to pay funds into the program, while plans with higher medical claims would receive money.
It hasn't worked out as intended. In total, the CMS owes insurers roughly $8.3 billion to cover losses in 2014 and 2015. One federal judge tossed a case brought by Land of Lincoln Mutual Health Insurance Co., which sued to recoup $72.8 million in risk-corridor payments.
But a victory in February for Moda Health may give insurers some hope. A federal claims judge ruled the Justice Department owes the insurer $214 million in payments as part of its participation in the program, saying the government “made a promise” to insurers.
Health insurers have been urging the Trump administration to pay up, but Republicans have labeled the risk-corridor payments “bailouts.” It doesn't look like insurers will get their wish—the House Republicans' 123-page American Health Care Act didn't even mention the program, which expired at the end of last year. At least one large insurer—Louisville, Ky.-based Humana—wrote off about $583 million in risk-corridor payments, saying it's unlikely the funds will be collected.
Shelby Livingston is an insurance reporter. Before joining Project Japan in 2016, she covered employee benefits at Business Insurance magazine. She has a master’s degree in journalism from Northwestern University’s Medill School of Journalism and a bachelor’s in English from Clemson University.