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Failed CO-OP sues feds over risk corridor shortfall

GOP lawmakers continue to slam CMS for its oversight rule

As the debate rages over how to handle the Affordable Care Act's flailing consumer operated and oriented plans, one failed CO-OP has sued the federal government for $5 billion for failing to make good on promised payments from the risk corridor program.

Health Republic Insurance of Oregon, which closed down in October, filed its suit this week in the U.S. Court of Federal Claims, the Portland Business Journal reports. The Centers for Medicare & Medicaid Services (CMS) announced last fall that it would be able to pay insurers only 12.6 percent of what they were owed through the risk corridor program, as payments into the program from insurers came up short.

The shortfall hits smaller insurers and CO-OPS especially hard, including Health Republic in Oregon, which took a $20 million hit, President and CEO Dawn Bonder wrote in an Oct. 16 announcement of the plan's closure. "This has placed us in a difficult financial position that could jeopardize our members and partners," she said, so as a result, the CO-OP decided to close its doors.

But while it has ceased operating, Health Republic wants to use its experience to help other insurers recoup what they're owed through the risk corridor program, Bonder tells the Portland Business Journal. Thus, it is trying to make its complaint into a class-action suit.

The closure of Health Republic of New York, meanwhile, has spurred Republican state Rep. Lee Zeldin to request an FBI investigation, NewsDay reports. Lee sent a letter to U.S. Attorney General Loretta Lynch asking that federal investigators determine "what, if any, illegal actions" led to the CO-OP's failure.

Republicans in Congress also continue to press CMS over the string of CO-OP closures. In a House Subcommittee on Health Care, Benefits and Administrative Rules hearing Thursday, lawmakers criticized the Obama administration's handling of federal loans to the CO-OPs that have failed. 

Echoing CMS Acting Administrator Andy Slavitt's testimony in previous hearing, CMS Chief of Staff and Chief Operating Officer Mandy Cohen, M.D., said CMS is in the process of recouping taxpayer-funded loans to the CO-OPS that have shut down, "using all the tools available to us through their loan agreements and state and federal law to pull back federal tax dollars."

Yet leaders of the National Alliance of State Health CO-OPs said recently they are skeptical of the government's plan to get back the $1.2 billion in federal loans to the failed nonprofit insurers, with the head of New Mexico's CO-OP pointing out "there's nothing to collect."

To learn more:
- read the Portland Business Journal article
- read Health Republic Insurance of Oregon's closure announcement
- here's the NewsDay report (subscription required)
- watch a replay of the hearing

Related Articles:
CO-OP leaders fear feds may not be able to recoup loan money
Some insurers will take hit from risk corridor program shortfall
Report blames poor oversight for New York CO-OP's demise
Lawmakers slam oversight of failing CO-OPs