What you need to know about the forces reshaping our industry.


February 13, 2017

Judge: Feds must pay health insurer $214M over risk corridors program

Daily Briefing

A federal judge on Thursday ruled that the federal government owes insurer Moda Health $214 million in Affordable Care Act (ACA) risk corridors payments.

Background: Insurers sue fed over inadequate risk corridors payments

The ACA's risk corridors provision calls for federal payments to health insurers to help offset the costs they might incur by enrolling a higher-than-expected number of sick people through the insurance exchanges.

Under the program, which launched in 2014 and ended in 2016, HHS is required to reimburse a designated amount of insurers' losses on exchange plans. Companies with better-than-expected medical expenses were expected to help fund the program.

However, the program has faced a significant funding shortfall and CMS has been unable to reimburse insurers in full, prompting lawsuits from several insurers seeking their full payments.

Moda in June 2016 filed such a suit, claiming it received only $11.2 million of the approximately $90 million it was owed under the risk corridors program for 2014. Further, the company said it is owed about $101 million in risk corridors payments for 2015 and that CMS has said it will not make those payments in full.

Ruling details

U.S. Court of Federal Claims Judge Thomas Wheeler ruled that the federal government has a contractual obligation to pay Moda the money it is owed under the risk corridors program, CQ HealthBeat reports.

Wheeler wrote, "Whether under statute or contract, the court finds that the government made a promise in the risk corridors program that it has yet to fulfill." He continued, "Today, the court directs the government to fulfill that promise. After all, 'to say to [Moda], 'The joke is on you. You shouldn't have trusted us,' is hardly worthy of our great government."


Moda's is the first in a string of lawsuits over risk corridors payments in which a judge has ruled in an insurer's favor, according to Tim Jost, a professor emeritus at Washington and Lee University's School of Law.

A federal judge in November 2016 dismissed a similar case filed by Illinois-based Land of Lincoln Health (LLH), ruling that LLH did not have a valid claim to the risk corridors payments because the ACA does not clearly indicate that insurers are entitled to them. The judge wrote in the ruling that HHS reasonably interpreted from the ACA's risk corridors provision that the federal government is not required to make the full risk corridors payments annually.

According to Modern Healthcare, Wheeler and the judge in the LHL case "appear to disagree on" whether CMS is legally obligated to make the full risk corridors payments. According to Axios, the split could mean risk corridors cases will be settled by an appeals court.

Further, Jost said the ruling in Moda's case could encourage more insurers to file suit over unpaid risk corridors payments (Castellucci, Modern Healthcare, 2/9; Manning, The Oregonian, 2/9; Owens, Axios, 2/9; Mershon, CQ HealthBeat, 2/9 [subscription required]; Associated Press/Sacramento Bee, 2/9).

Preparing for a presentation? Download slides on the latest health care trends

We updated our most popular slides depicting the important market forces affecting your business in 2016, so you're ready for your next strategy presentation.

Whether you're speaking to your board, C-suite, or community, you'll have access to the latest data, pre-formatted and ready to present. Across 53 slides, we collected everything you need to know about payment reform, the provider market, purchaser behavior, and provider selection trends.


Have a Question?


Ask our experts a question on any topic in health care by visiting our member portal, AskAdvisory.