A nonprofit health insurer in Maryland is suing the federal government to avoid more than $22 million in fees under an ObamaCare program that the group calls “dangerously flawed.”
The first-of-its-kind lawsuit targets the Obama administration’s strategy for protecting health insurers from losses in the new marketplace.
In a lawsuit filed Monday, Evergreen Health Cooperative Inc. warned the program could “threaten the viability of the entire Affordable Care Act” if it is not fundamentally altered.
Evergreen Health, a nonprofit co-op, said it has been unfairly asked to pay millions of dollars — about one-quarter of its 2014 premiums revenue – under the law’s “risk adjustment” program.
Under the program, states collect money from better-performing insurers, like Evergreen, to pay companies that have racked up higher-than-expected medical costs.
But Peter Beilenson, Evergreen’s CEO, argued the program uses an unfair formula that “tilts the field” in favor of larger, more-established companies over newer startups like the co-op programs.
“If the system isn’t changed in the immediate future, many of the country’s most innovative and most affordable health insurance companies could very well go out of business,” Beilenson wrote in a statement Monday.
Evergreen’s CEO has been a longtime supporter of ObamaCare but has begun to speak out about the law’s risk-sharing provisions this year.
He said regulators told him much of Evergreen Health’s payments would go to CareFirst, a long-established Blue Cross and Blue Shield affiliate.
Beilenson argues larger insurers like Carefirst have spent “hundreds of millions of dollars” to figure out the government’s formula to calculate risk adjustment, helping to position themselves for a bigger payday from other insurers.
“Contrary to the ACA’s original intent, the risk adjustment methodology developed by [the Centers for Medicare and Medicaid serves] has simply been a financial boon for the country’s largest and most established health insurers, at the expense of new, innovative insurers,” he wrote.
Maryland’s program is one of about 10 surviving co-ops created under the 2010 healthcare law. It was launched with the help of more than $65 million in federal ObamaCare grants.
The initial 23 nonprofit programs were expected to increase competition in the private sector-dominated marketplace.