Insurance Co-Op Sues Government Over Loss of CSRs

Gregory A. Freeman, January 15, 2018

The lawsuit is the first in response to the Trump administration dropping the subsidies. It asks for damages in the amount of the subsidies it would have received.

In the first of what could become a series of litigation from insurers struggling to make it in the individual market, a Maine insurance co-op is suing the federal government over the decision to end the cost-sharing reduction (CSR) payments that made it possible to provide coverage for low-income consumers.

Maine Community Health Options filed the lawsuit asking for damages in an amount equal to the CSR payments it would have received for 2017, which are not specified in the filing. The lawsuit notes that the Congressional Budget Office estimated about $7 billion in CSR payments would be made to insurers in the Affordable Care Act individual marketplaces in 2017.

The co-op committed itself to participating in the marketplace for 2017 “with the express understanding—based on the plain text of Section 1402 and the Government’s actions in previous benefit years—that, for those plans that required the issuers to reduce cost-sharing obligations of the enrollee, the Government would honor the statutory mandate, i.e., ‘the Secretary shall make periodic and timely payments to the issuer equal to the value of the reductions.’”

Related: CSR Loss, Rising Employment May Hurt Health Plans

The lawsuit, which was submitted by attorney Stephen McBrady, based in Washington, D.C., says the law clearly requires the government to make the CSR payments.

The claim notes that Maine insurance regulations do not permit health plans, such as Health Options, to raise premiums mid-benefit year to cover the cost of losing the CSRs. That means the co-op provided discounts in good faith but then the government did not reimburse it as promised, the lawsuit says.

The Trump administration ended CSRs in late 2017, saying they payments were illegal because Congress never appropriated funds for them. Health Options says the money was promised and business strategies were built around the expectation of payment.

“Regardless of whether Congress appropriated sufficient funds to HHS to make the CSR payments, the government’s statutory obligation to make such payments, and Plaintiff’s right to those payments, remain,” the lawsuit says.

The loss of the subsidies contributed to some health plans raising 2018 premiums and deductibles, which were already on the rise because of high utilization in some cases. Insurers are still legally required to offer reduced cost-sharing in silver-level plans to low-income consumers with incomes up to 250% of the poverty level.

Many health plans bet on the likelihood that the government would terminate the CSR payments and raised premiums accordingly, and others counted on the payments continuing. In some states health plans were told what to assume by state insurance departments.

Some state insurance regulators accepted two sets of rates, one to be used if CSR payments continued and another if the government cancelled them.

Gregory A. Freeman

Gregory A. Freeman is a contributing writer.

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