Issues with the Federal Government Lewis Roca Rothgerber Christie 1 - - PDF document

▶
issues with the federal government
SMART_READER_LITE
LIVE PREVIEW

Issues with the Federal Government Lewis Roca Rothgerber Christie 1 - - PDF document

Mar 01, 2023 228 likes •408 views

7/20/2016 Issues with the Federal Government Lewis Roca Rothgerber Christie 1 PANEL Moderator Frank OLoughlin: Lewis Roca Rothgerber Christie LLP and Counsel to Various Life and Health Insurance Guaranty Associations Robert H.

slide-1
SLIDE 1

7/20/2016 1

Issues with the Federal Government

1 Lewis Roca Rothgerber Christie

PANEL

  • Moderator

– Frank O’Loughlin: Lewis Roca Rothgerber Christie LLP and Counsel to Various Life and Health Insurance Guaranty Associations

  • Robert H. Nunnally, Jr.: Partner in Wisener Nunnally Roth, LLP. And Counsel to

Receiver of SeeChange Health Insurance Co.

  • Douglas J. Schmidt: Partner in Husch Blackwell LLP and Counsel to Receiver of

CoOportunity Health (Iowa)

  • Michael Conway: Colorado Deputy Commissioner of Consumer and Compliance

Services and actively involved in Colorado HealthOp Liquidation

2 Lewis Roca Rothgerber Christie

slide-2
SLIDE 2

7/20/2016 2

The Three R’s

  • Reinsurance
  • Risk Adjustment
  • Risk Corridor

3 Lewis Roca Rothgerber Christie

Reinsurance

  • Only available for individual coverage (group does not qualify)
  • Cost:

– 2014: $12 billion + paid ($63 per member) – 2015: $7 billion + to be paid ($44 per member) – 2016: $5 billion + to be paid ($27 per member)

  • Payments:

– 2014: 100% reinsurance for claims between $45,000 and $250,000 – 2015: ~50% reinsurance for claims between $45,000 and $250,000

4 Lewis Roca Rothgerber Christie

slide-3
SLIDE 3

7/20/2016 3

Risk Adjustment

  • Permanent
  • HHS or Exchange compares actuarial risk of each plan to all
  • ther plans in state
  • Plans that enrolled policyholders with a lower projected

actuarial risk will make payments to those that enrolled policyholders with a higher projected actuarial risk

  • HHS or Exchange will declare the payees and payers and issue

invoices

5 Lewis Roca Rothgerber Christie

Risk Corridor

  • Only applies to the exchange business
  • Partially funded by insurance companies
  • Congress did not allow federal funding in 2014 and 2015
  • Ends in 2016

6 Lewis Roca Rothgerber Christie

slide-4
SLIDE 4

7/20/2016 4

Risk Adjustment/Reinsurance

  • CMS offset 2014 Risk Adjustment and Reinsurance payments

against one another in summer of 2015

  • Also reserved 10% of 2014 Reinsurance payments for

distribution in December of 2015

  • CMS promised early payment of 2015 Reinsurance payments

– Paid (or not) in March of 2016

7 Lewis Roca Rothgerber Christie

Risk Corridor

  • In July of 2015, CMS told Departments that it would be paid in

full

  • On October 1, 2015, CMS defaulted on the Risk Corridor

payments

  • Only paid 12.6%

8 Lewis Roca Rothgerber Christie

slide-5
SLIDE 5

7/20/2016 5

Disputes with the Federal Government

9 Lewis Roca Rothgerber Christie

California SeeChange

  • CMS asserts a failure of the company to comply with ACA 3R

reporting requirements

  • $5 million demand by CMS

– Risk Adjustment default charges – Reinsurance premium – Penalties, interest, expenses

10 Lewis Roca Rothgerber Christie

slide-6
SLIDE 6

7/20/2016 6

Proofs of Claim

  • One Filed with Receiver by CMS
  • One Filed with Receiver by DOJ
  • April 22, 2016 Letter from Receiver to CMS/DOJ seeking

clarification

11 Lewis Roca Rothgerber Christie

DOJ Response

  • June 13, 2016 DOJ Letter

– Assert Federal Super‐priority – ACA Preempts State Insurance Statutes and Regulations – McCarran‐Ferguson and Fabe are not Applicable – Personal Liability for Receiver if Payments Made to Others Before the Federal Government

12 Lewis Roca Rothgerber Christie

DOJ

slide-7
SLIDE 7

7/20/2016 7

CoOportunity‐Iowa

  • Factual Background

– Lost $163 Million Year One – CMS Requested Liquidation Date of February 28 – Discussions With CMS With Regard To Set Off Of All Charges And Loans

13 Lewis Roca Rothgerber Christie

2 Types of Loans to CO‐OPs

  • Start‐Up Loans

– Purpose to cover start‐up costs – Subordinate to policyholder claims – Other CO‐OPs given option to convert to solvency loan

  • Solvency Loans

– Surplus notes – Used to satisfy capital requirements – Subordinate to all other claims – May be repaid only with Commissioner’s permission

14 Lewis Roca Rothgerber Christie

slide-8
SLIDE 8

7/20/2016 8

Who’s on First?

  • CMS
  • DOJ

15 Lewis Roca Rothgerber Christie

Filed a Complaint on May 3, 2016

  • Pending in Federal District Court‐‐Iowa
  • Defendants: CMS, HHS, Secretary of HHS and USA
  • Seeks Declaratory Relief and Injunctive Relief Regarding:

– Application of Federal vs State Priority Statutes – CMS Netting Regulation and Application of it Arbitrary and Capricious – Contractual Subordination of Federal Loans – 2015 Risk Adjustment Charges Arbitrary and Capricious

16 Lewis Roca Rothgerber Christie

slide-9
SLIDE 9

7/20/2016 9

Preliminary Injunction

  • Declaration That Iowa Law Controls
  • Enjoin Future Netting Absent Court Permission
  • All Netted Funds Paid Into Court

17 Lewis Roca Rothgerber Christie

The Decision of the Court

Lewis Roca Rothgerber Christie 18

slide-10
SLIDE 10

7/20/2016 10

Next Steps

  • Appeal of Preliminary Injunction Decision
  • Proceed with Prosecution of Lawsuit
  • Proceed with Determination of HHS Claim in Liquidation

Proceeding

Lewis Roca Rothgerber Christie 19

Colorado HealthOp

  • CMS offset against Reinsurance receivables

– Risk Adjustment charges – APTC and CSR overpayments – Other fees

  • CMS failed to net all 3Rs, only netted 2 Rs
  • No accounting for Risk Corridor receivable

20 Lewis Roca Rothgerber Christie

Risk Corridor Netted

slide-11
SLIDE 11

7/20/2016 11

Remedy: Administrative

  • Administrative Appeal
  • ACA Regulation Appeals

– Calculation/Methodology

  • 3 Rs
  • APTC
  • CSR
  • Exchange Fees
  • Timing for Appeal

21 Lewis Roca Rothgerber Christie

Administrative Appeal Status

  • No formal response from CMS
  • Within one week, CMS Wires $2.6 million
  • Later wires another $600,000
  • No explanation from CMS

22 Lewis Roca Rothgerber Christie

slide-12
SLIDE 12

7/20/2016 12

Risk Adjustment

  • June 30, 2016 Summary Report
  • CO‐OP owes approximately $42 million
  • 2 R’s netting ‐ $18 million owed
  • Next move…

Lewis Roca Rothgerber Christie 23

Remedies: Litigation/Oregon Class Action

  • Filed by management of Health Republic
  • Risk Corridor Receivable‐‐$2.5 billion
  • Filed in Federal Claims Court in D.C.
  • Based on the Tucker Act
  • Class Members

– All QHP’s with a Risk Corridor receivable

24 Lewis Roca Rothgerber Christie

slide-13
SLIDE 13

7/20/2016 13

Tucker Act Theory

  • Failure by Congress to appropriate funds cannot defeat a

government obligation created by statute

  • ACA § 1342 mandates payment of the Risk Corridor funds
  • The “Secretary shall pay to the plan an amount” calculated per

the Risk Corridor statute

25 Lewis Roca Rothgerber Christie

Other Tucker Act Suits

  • Pennsylvania Highmark and West Virginia Blues

– Filed: May 17, 2016 – Seek: $223 million

  • Moda Health of Oregon

– Filed: June 1, 2016 – Seeks: $180 million

  • BCBS of North Carolina

– Filed: June 2, 2016 – Seeks: $147 million

  • Land of Lincoln of Illinois

– Filed: June 23, 2016 – Seeks: $73 million

26 Lewis Roca Rothgerber Christie

slide-14
SLIDE 14

7/20/2016 14

Tucker Act Battlegrounds

  • Risk Corridor funds were not appropriated by Congress
  • “Money‐mandated statute”
  • Risk Corridor payments are not yet due‐3 year program
  • Legal issue is not ripe

27 Lewis Roca Rothgerber Christie

U.S. House of Representatives v. Burwell

  • U.S. District Court
  • Decision: May 12, 2016

– Funds for ACA § 1402 (which reduces deductible, co‐pays and other cost sharing subsidies) were not appropriated by Congress – Therefore, HHS/Treasury violated U.S. Constitution by funding CSR with public funds – Judgment stayed pending appeal

28 Lewis Roca Rothgerber Christie

slide-15
SLIDE 15

7/20/2016 15

One More Lawsuit

  • Evergreen Health (Maryland COOP) files suit against U.S. on

June 13, 2016

  • Pending in U.S. District Court Maryland
  • Seeks Declaratory and Injunctive Relief
  • Prohibit Risk Adjustment Payments by COOP until and unless

the Risk Corridor payments are made by HHS

29 Lewis Roca Rothgerber Christie

Illinois Department Action

  • Agreed Corrective Order Entered June 27, 2016
  • Prohibits Land of Lincoln from paying any Risk Adjustment

charges until:

– 2014 and 2015 Risk Corridor receivables are collected – Final judgment is entered in the Tucker Act litigation – Permission is granted by the DOI

  • Based on HHS Final Interim Order dated May 11, 2016
  • “States are the primary regulators of their insurance markets”

30 Lewis Roca Rothgerber Christie

slide-16
SLIDE 16

7/20/2016 16

CMS Position

  • CMS Rejects Illinois DOI Approach
  • Land of Lincoln Placed into Rehabilitation on July 14, 2016

Lewis Roca Rothgerber Christie 31

Questions or Discussion

32 Lewis Roca Rothgerber Christie