Insurer sues over drug plan sanction

Blue Cross: Ban defies law’s intent

Arkansas Blue Cross and Blue Shield has filed a lawsuit over a decision by federal officials to bar the insurer from enrolling new customers in its Medicare prescription drug plans this year.

The federal Centers for Medicare and Medicaid Services notified the Little Rock-based company last month that it would face that sanction for failing to meet a requirement established under the 2010 Patient Protection and Affordable Care Act.

The law requires that at least 85 percent of the money a company collects in drug plan subsidies and premiums go toward customers’ drug expenses, rather than administrative expenses or profits.

Since 2014, companies that fail to meet the required spending ratio, known as a medical loss ratio, have been required to refund money to the federal government.

Companies that miss the target for three consecutive years are barred from enrolling new customers in drug plans for one year.

Arkansas Blue Cross and Blue Shield’s drug plans are the only ones in the country listed on a federal website as being barred from accepting new customers during this year’s sign-up period, which begins Sunday and runs through Dec. 7 and allows Medicare beneficiaries to sign up or change drug or Medicare Advantage plans.

In the lawsuit, filed Tuesday, Arkansas Blue Cross and Blue Shield contends that Congress didn’t intend the requirement to apply to stand-alone prescription drug plans.

Instead, the lawsuit contends, the requirement was meant to apply only to Medicare Advantage plans, which cover medical benefits and also often cover prescription drugs.

U.S. District Judge Leon Holmes set a hearing for

today on the insurer’s request that he issue a temporary order lifting the suspension on enrollment while the lawsuit is pending.

The company’s stand-alone drug plans cover about 38,000 of the 614,000 Arkansans enrolled in the federal insurance program for the elderly and disabled.

Suspending enrollment would “squander the investment and planning the company put into this year’s open enrollment period” and would risk “confusing current Arkansas Blue Cross and Blue Shield enrollees, some of whom may believe they have to choose a new plan,” the company argues in the suit.

The company estimated that the suspension would cause it to lose as much as 15 percent of its drug plan customers. Since some administrative costs are fixed, the loss of enrollment would make it more difficult to meet the medical loss ratio requirement in future years, the company contends.

The suspension will also have “ripple effects for the company’s reputation and business standing in the media, with the general public, and in its distribution channels,” possibly driving customers away from its other health insurance products, the company said in its request for a temporary order.

Attorneys for the U.S. Department of Health and Human Services responded in a court filing on Wednesday that the law is “unambiguous” in creating the medical loss ratio requirement for drug plans. They called Arkansas Blue Cross and Blue Shield’s claims that the suspension would hurt the company’s business “unsubstantiated and speculative.”

Any such harm, they added, should be weighed against the public interest in enforcing the law, which they said is designed to “expand access to affordable health care and to improve the functioning of the health insurance market.”

The suspension wouldn’t affect those who are in Arkansas Blue Cross and Blue Shield drug plans now, but it would prevent new customers from enrolling in the plans.

In the lawsuit, the company noted that none of the other 10 companies offering standalone drug plans in the state is based in Arkansas.

The other plans “are administered by national insurers, who may be unfamiliar with the needs of the local market, or who may discourage their enrollees from buying from locally-owned pharmacies,” attorneys for Arkansas Blue Cross and Blue Shield wrote.

“We wanted to have a federal court make the decision since folks will begin enrollment this Sunday, and we’re the only local plan that’s an option for them,” company spokesman Max Greenwood said Wednesday.

According to the Centers for Medicare and Medicaid Services, Arkansas Blue Cross and Blue Shield reported a medical loss ratio of 79.8 percent in 2014, 81.3 percent 2015 and 84 percent in 2016.

Greenwood said the company “overestimated the amount of money we expected to pay out in prescription drug claims and underestimated the amounts received from the various programs that are in place to defer the high cost of drugs.”

She noted that the company has come closer each year to meeting the 85 percent target.

In the lawsuit, the company noted that even before the Affordable Care Act, a federal “risk corridors” program required companies to refund money to the federal government if their profits from drug plans exceeded a certain amount.

Congress didn’t need to establish the medical loss ratio requirement for the drug plans because the risk corridors program “served a similar function,” the company’s lawsuit argues.

The attorneys for the Health and Human Services Department responded that “virtually identical” arguments were raised when the regulations implementing the medical loss ratio requirement were published in 2013.

Centers for Medicare and Medicaid Services officials said at that time that the risk corridor and medical loss ratio programs “serve different purposes” and that the law required the agency to enforce the medical loss ratio requirement, the attorneys wrote.