Minuteman Health Inc., a small health insurer, is suing the federal government over a controversial measure of the Affordable Care Act that is costing the Boston company millions of dollars a year.
Minuteman’s executives have long criticizedthe so-called risk adjustment policy, which requires insurers with healthier members to make payments to insurers with sicker members. The payments are designed to share the costs of coveringpeople with expensive medical needs among insurers. Some companies have had to pay millions into the program, while others have received millions.
In a suit filed Friday in federal court, Minuteman argued that the federal government is using a flawed and illegal formula for calculating the payments, which it said amounts to an unfair tax on small insurers like Minuteman that offer low-cost products.
The federal government essentially created a “reverse Robin Hood” program that rewards expensive insurance companies, Minuteman chief executive Tom Policelli said in a statement. “[The government] penalizes innovative, lower-premium carriers whose mission is to provide products to price-sensitive consumers.”
Minuteman launched in 2013 to compete for individuals and looking for lower-cost plans; it contains costs by using smaller networks of doctors and hospitals. The company enrolled fewer members than expected and lost money in its first two years, but executives said membership has since grown and finances have stabilized.” Policelli has described risk adjustment policy as the biggest threat to the company’s business model.
Minuteman, which operates in Massachusetts and New Hampshire, said it was told June 30 that it must pay more than $16 million into the program this year, including $6 million in Massachusetts. Other companies have been assessed even higher payments, which reflect results from 2015. Tufts Health Plan, one of the larger insurers in Massachusetts, was required to pay $30 million this year.
The biggest recipient of risk adjustment payments is Blue Cross Blue Shield of Massachusetts, which is to receive $40 million this year. Blue Cross is the largest commercial health insurer in the state.
Many insurers across the country have complained about the formulas used to devise risk adjustment payments. Federal officials have indicated they will make changes to the program, but Policelli said those changes will come too late, making the lawsuit necessary.
The suit names the US Department of Health and Human Services, the Centers for Medicare and Medicaid Services, and the heads of both of those agencies.Priyanka Dayal McCluskey can be reached at email@example.com. Follow her on Twitter @priyanka_dayal.