CSR Lawsuit Update: "Fasten your seatbelts...it's gonna be a bumpy ride"

Over at Inside Health Policy (paywall), Amy Lotven has an update regarding the eyebrow-raising decisions a few weeks ago by federal judges in several of the Cost Sharing Reduction (CSR) reimbursement payment lawsuits.

The general thinking at the time was that the judges would simply rule in the carriers favor and order the Trump Administration to pay the carriers the money owed to them from the last three months of 2017 (over $2 billion nationally, although the amounts at stake for each individual carrier suing is generally kmore along the lines of seven figures each). If this had been what happened there likely wouldn't have been much more to the story.

Instead, all three judges ruled--on behalf of dozens of carriers, since at least one of the cases is a class action suit--that the government owes them CSR payments for not only Q4 2017, but all twelve months of 2018 as well, assuming the carriers wanted to demand those payments.

As I explained at the time, if these rulings hold, it's conceivable that the Trump Administration, which has already unintentionally caused ACA subsidy spending to increase by up to $20 billion per year by cutting off CSR funding in the first place--could potentially have to effectively reimburse the insurance carriers twice...potentially to the tune of an additional $12 billion on top of that.

If this were to happen, the insurance carriers would find themselves with a massive windfall due to double dipping...but thanks to the ACA's Medical Loss Ratio rule, it's also likely that they would then have to turn around and rebate some or all of that money to their enrollees in order to keep their gross profit margins under 20%.

Anyway, when I last checked in on this remarkable situation, at least one of the judges in the case (Margaret Sweeney) had given both the plaintiffs and the defense up until February 28th to figure out just how much of a payment the carrier was asking for...a deadline which was then extened out until yesterday, March 5th.

That brings us to today's development...

Insurers Seek Billions In 2017, 2018 CSRs; DOJ Eyes CHC Case For Appeal

The Department of Justice is asking the federal claims court to issue a final judgment of about $71 million in 2017 and 2018 cost-sharing reduction payments for Community Health Choice (CHC), in order to smooth the way for a quick appeal, but wants the court to wait until CMS completes the 2018 reconciliation process before entering a judgment for Maine Community Health Options (MCHO) and the class action suit led by Common Ground Health Co-Op. MCHO agrees to hold off until the reconciliation process, but Common Ground rejects the proposal and asks the court to enter judgment for $2.36 billion and make any needed adjustments following reconciliation conducted by a third-party.

Whoa. The first sentence actually isn't surprising--it's not that the DoJ is agreeing to pay the $71 million, they're just agreeing that that's the amount in dispute so that they can move on to the appeals process.

The last part, from Common Ground (that's the class action case, representing over 90 insurance carriers) is more aggressive than I was expecting--they're demanding that the court not pussyfoot around and shell out the money to everyone pronto, for both 2017 and 2018 (see below).

In a joint status report for the Community Health Choice case, CHC and DOJ agreed the issuer is owed about $11.1 million for the 2017 plan year. Further, CHC used the 2017 data to determine that it is owed about $60.3 million for the 2018 plan year. DOJ says that while it would normally wait until the CSR reconciliation process is completed in order to glean actual amounts, the government has agreed to the CHC calculations in this case, subject to certain caveats. First, the government waives the right to dispute the 2018 amount yet retains the ability to make arguments against other damages, including that the $60.3 million should be reduced by the amount CHC received in additional premiums due to the silver-loading workaround.

The 2018 amount is more than 5x as much as the Q4 2017 amount instead of 4x as much, but that's going to vary widely by carrier since their CSR expenses change from year to year. Also note that the DoJ doesn't dispute the 2018 amount itself...just whether or not they get to avoid paying that portion given that CHC made up the gap via silver loading instead.

...The parties in the Common Ground class action case, which involves more than 90 other issuers, failed to reach an agreement.

The class is requesting the court enter a judgment of $2.36 billion for 2017 and 2018, which includes about $10.7 million in actual payments for 2017 and $2.26 billion it would have received in 2018 prior to reconciliation, according to government data. Common Ground says that the court could authorize a third-party to conduct reconciliation and make any needed adjustment to the amount. “Plaintiffs’ proposed approach is not novel,” the lawyers argue. “Other Court of Federal Claims judgments have involved entry of a single judgment in favor of the class, followed by a claims adjudication process, with excess funds returned to the Government,” they add.

Needless to say, the DoJ is rejecting that demand. Stay tuned...