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Oregon insurer files $5 billion class-action suit against feds over subsidies


Health Republic Insurance Company of Oregon, a Lake Oswego-based insurer that is phasing down its operations, on Wednesday filed a $5 billion class action lawsuit on behalf of insurers it says were shorted by the federal government under an Obamacare program.

The lawsuit, filed in the United States Court of Federal Claims, focuses on a program that was intended to offset insurer losses in the early years of the implementation of the Patient Protection and Affordable Care Act.

Instead, payments to insurers under the "risk corridor" program amounted to 12.6 percent of the amount expected for 2014, and are expected to be similarly low for 2015.

Federal law and regulations "are unequivocal about the payments the Government must make," according to the lawsuit. "The law is clear: the Government must abide by its statutory obligations."

The federal government has said it hopes to make insurers whole by using funds from subsequent years to make up payments still owed from earlier years. "In the event of a shortfall for the 2016 program year, HHS will explore other sources of funding for risk corridors payments, subject to the availability of appropriations. This includes working with Congress on the necessary funding for outstanding risk corridors payments," according to a federal Centers for Medicare & Medicaid Services website.

Because it is a class-action, other insurers could benefit from the lawsuit, such as Moda Health, the once-dominant Oregon firm that was recently the subject of state intervention to ensure continued solvency.

Health Republic was one of 23 federally backed startups set up to increase competition in selected markets. Last fall it announced that as a result of not receiving the federal funds expected, it would wind down operations in an orderly manner rather risk insolvency later and leave members and providers in a jam.

Dawn Bonder, president and CEO of Health Republic, said in a prepared statement that her company gambled on the new Affordable Care Act market while assuming the federal government would follow through on its obligations.

“Health Republic did exactly what we were asked to do under the ACA: we designed and priced our plans for the market we hoped would materialize, not for the market we feared would materialize. Like every health insurer in the post-ACA market, we knew the costs of this new population could be astronomical, but we couldn’t be sure until we learned who purchased our plans and analyzed their medical costs under the new ACA plans. Without the risk-sharing provisions in the ACA, especially risk corridor, we, along with every other health insurer across the nation, would have been forced to think long and hard about how to proceed in these new uncharted waters created by the ACA. It is unconscionable for the government to default on their obligation to pay the risk corridor amounts owed in a timely manner.”

Health Republic is represented by Stephen Swedlow, J.D. Horton, and Adam Wolfson of the law firm Quinn Emanuel Urquhart & Sullivan, LLP