Health insurers are asking the federal government for billions in subsidies to cover losses they claim they suffered under the ACA, even if they no longer offer participating plans on HealthCare.gov.
The health insurance industry as a whole has already been paid billions in programs meant to encourage their participation in Obamacare.
Insurers have raised premiums or fled the marketplace anyway. Premiums on the individual exchange are rising an average of 37 percent next year, and eight states now offer only one insurer. For consumers who don’t have insurance through their employer, getting covered may become prohibitively expensive.
In a recent announcement touting its profitable third quarter results, Aetna told investors that it is “entitled to receive a total of $314 million” from the Health and Human Services (HHS) department to cover ACA losses from 2014 through 2016.
Humana is taking more aggressive action. The provider recently sued the federal government, demanding $611 million to cover ACA losses, making the company the latest of numerous insurers to file similar lawsuits. “The government's refusal to pay money due … gives rise to significant financial difficulties," Humana said in its complaint.
Both insurers have dropped out of the ACA exchange for 2018, meaning that Aetna and Humana customers currently shopping for individual plans on HealthCare.gov will have to find a new provider. As a result, it’s unclear what, if any, benefit these hefty payments would have for consumers.
Neither Aetna nor Humana have returned messages from ConsumerAffairs asking whether they would have stayed in the marketplace had they received the government subsidies that they want.
Research from the Commonwealth Fund has found that Americans spend more on health care than any other nation, but that the quality of care ranks at the bottom when compared with 25 other nations. Some health workers, like the unions representing nurses, advocate for a health care overhaul that would eliminate the need for the health insurance industry altogether.
After suing, Humana boasts about profits
Five days after Humana sued the government due to “financial difficulties,” the insurer was singing a different tune. Humana told investors that it was continuing “to produce exceptional financial results,” though not as strong as they were last year. On November 8, Humana reported third quarter pre-tax profits of $799 million.
Despite solid profits, the company also announced plans to lay off or buy out 2,700 workers. Humana CEO Bruce Broussard, who earned a $19.7 million compensation package last year, said that the layoffs are intended “to create capacity,” adding that there is a “continued need to invest in the business.”
Insurers negative about ACA customers
Insurers have complained that ACA customers are too sick, unhealthy, and expensive to continue covering. Aetna has been especially negative about the health reform law, as the Hill newspaper reported in May. At the time, Aetna announced it was dropping out of the 2018 exchange due to what it described as $700 million in losses. Aetna anticipated it would lose another $200 million in 2017 thanks to ACA customers.
However, the company continues to share a much more positive message with investors. On September 30, Aetna recorded earning $1.7 billion in profits so far this year. The insurer mentions in that same announcement that it is owed an additional $314 million from Health and Human Services to cover Affordable Care Act losses, though it acknowledges that government funding is uncertain.
Regardless, business appears great, despite the insurer’s brief and unhappy participation in the Obamacare exchange. “Our third-quarter results are a continuation of our momentum from the first half of the year,” said Aetna chairman and CEO Mark T. Bertolini, who earned a $41 million compensation package in 2016.
Justification for demanding more money
Aetna and Humana are just two of many insurers who claim to be owed government money under the Affordable Care Act. The insurers are demanding money specifically from the risk corridor program, which the federal government argues was never supposed to come at the expense of taxpayers.
Risk corridors were a temporary measure that worked by pooling a percentage of money from profitable health insurance plans and paying the funds back to insurers who reported losses in the first three years of the ACA’s implementation. They were one of three programs meant to encourage insurer participation in the marketplace, but critics said the money failed to trickle down to consumers.
Aetna and Humana already received a respective $12.5 million and $30 million in risk corridor money to cover 2014 losses, company documents show. In addition to risk corridor payments, the Center for Medicaid Services has also paid all participating health insurers a total of $7.9 billion in reinsurance and $4.6 billion in risk judgment, two similar risk stabilization programs.
Insurers have fled the Affordable Care Act marketplace or raised premiums anyway, leaving people who aren’t insured through their employer or by government programs like Medicare with fewer options.
Why the government is fighting claims
Nearly two dozen insurers have sued the federal government in recent years for risk corridor money, with varying success. In February, a judge sided with Oregon-based health insurer Moda, who sued for $214 million in risk corridor payments.
The Center for Medicaid Services has countered that it cannot pay the insurers money it does not have. Health insurers requested a total of $2.9 billion in risk corridor payments for 2014, even though they only contributed $362 million to the risk corridor pool that year. The government paid the insurers what it could afford for 2014, but it has not issued payments for the last two years.
While the federal government contends that risk corridor payments must be “budget-neutral,” meaning that they should not cost taxpayers additional money, insurers like Blue Cross Blue Shield of North Carolina have described this stance as “revisionist history.”
The company claims it was promised risk corridor payments regardless of whether there is enough money in the risk corridor pool. This means that additional payments would come at taxpayer expense.
BCBS of North Carolina sued the feds for $147 million in risk corridor payments, but a judge dismissed the case in April on the grounds that the health reform law did not include a deadline of when insurers must be paid.
Government subsidies as a whole are a contested aspect of the Affordable Care Act, dividing Republicans who claim the law is a “bailout” for insurers and Democrats who accuse Republicans of sabotaging the law by purposely choking off funds. The health care industry spent a reported $3.4 billion lobbying both parties before and after the health reform passed.
Risk corridor payments are particularly controversial. Unlike the cost-sharing subsidy program, which subsidized the premiums of low-income Americans, risk corridor payments don’t directly benefit any particular population group. A left-wing doctors’ group, sharing an unlikely viewpoint with Republicans, has criticized the risk corridors as an unnecessary bailout for insurers.
“Risk corridors, risk adjustment, and reinsurance are not for the benefit of patients, rather they are to protect the insurers,” wrote Done McCanne, a doctor and senior policy fellow with the Physicians for a National Health Care Program.
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