South Carolina Department of Insurance hits CMS with $37 million lawsuit over risk-corridor payments
Agency says it's owed $37 million in payments for taking on the risk of insuring consumers who bought plans through the Affordable Care Act.
Photo Credit: Matthew G. Bisanz, via Wikimedia Commons
The South Carolina Department of Insurance is suing the federal government for $37 million in payments it says it is owed for taking on the risk of insuring consumers who bought plans through the Affordable Care Act.
The government's decision to withhold the funds led to the 2015 collapse of Consumers' Choice Health Insurance Company of South Carolina, one of 23 Consumer Operated and Oriented Plans established under the Affordable Care Act.
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The South Carolina Department of Insurance had no statement, but Director Ray Farmer reportedly told the Post and Courier that taxpayers would have to foot the $37 million bill if the amount is not recovered.
Consumers' Choice received millions in loans from the federal government when it was set up as a private, non-profit insurance company and began selling plans in the marketplace in 2014.
But by October 2015, Consumers' Choice said it would wind down operations due to financial losses. The co-op joined the ranks of at least 16 that had closed its doors by the start of this year.
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Numerous other insures also stopped selling plans on the marketplace saying the business was unsustainable.
Many blamed, and sued the federal government to collect promised risk corridor payments, one of three programs established under the ACA to help stabilize the insurance market.
Congress said it had never approved the funding for the risk corridors and made the program budget neutral. As a result, insurers in the ACA only got a portion of the promised funds.
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"The recent announcement of a risk corridor reimbursement of just 12.6 percent cast doubt on the collectability of tens of millions of dollars through the federal risk corridor program and led to an unavoidable outcome," Consumers' Choice CEO Jerry Burgess said in a statement on the co-op closure.
Consumers' Choice was placed into receivership on January 8, 2016, with Farmer the designated liquidator of the co-op.
Twitter: @SusanJMorse
