Two health insurance cooperatives are suing the Obama administration over a program designed to financially help insurers with sicker, more expensive customers.
Minuteman Health Inc., a nonprofit health plan that started in 2013, filed a lawsuit Friday in federal court that says the federal government is calculating the payments illegally and unfairly in a way that favors companies selling more expensive plans.
Minuteman caters to consumers looking for cheaper plans, and it keeps costs down by limiting the network of providers they can see. It is arguing that the "risk adjustment" program, in which insurers pay each other to take on sicker customers, isn't being implemented the way Congress intended.
In June, the Department of Health and Human Services ordered Minuteman to pay more than $16 million into the program this year. Minuteman says that amounts to a "tax" on its products.
"[The Centers for Medicare and Medicaid Services] created a program that rewards expensive insurance companies who cater to consumers buying expensive products," said Minuteman Chief Executive Tom Policelli. "CMS penalizes innovative, lower-premium carriers whose mission is to provide products to price-sensitive consumers. That is not what Congress directed CMS to do."
Another health cooperative, New Mexico Health Connections, also filed a lawsuit Friday arguing the administration used a formula that unfairly rewards big insurers. The two companies are among the seven cooperatives out of 23 set up under the Affordable Care Act that are still operating, as the others have failed.