► Minuteman Health NewsroomJuly 31, 2016

Minuteman Health files Risk Adjustment Lawsuit Against Federal Agencies, Officials

Lawsuit calls CMS Risk Adjustment program “unlawful, arbitrary and capricious;” seeks to block government from collecting further RA assessments

—Minuteman Health (www.minutemanhealth.org) on Friday filed a lawsuit in Boston federal district court against U.S. Health and Human Services (HHS) Secretary Sylvia Burwell, Centers for Medicaid and Medicare Services (CMS) administrator Andrew Slavitt and their respective agencies, claiming that the federal Risk Adjustment program has illegally cost Minuteman and its members millions of dollars.

Minuteman, which on June 30 was ordered to pay out $16.7 million under the Risk Adjustment formula, said it was bringing the suit “to put a stop to this system that is supposed to stabilize the market but instead has already caused tremendous destabilization and wreaked havoc for thousands of consumers trying to find an affordable health insurance policy.”

The Risk Adjustment program is meant to compensate insurers in the individual and small group markets whose enrollees are considered to be sicker and, therefore, costlier. The theory of risk adjustment is that plans should not fail or succeed only because they attract sicker or healthier enrollees, but should compete based on other factors such as price, efficiency, and service quality. But Minuteman argues that the federal government has implemented the Risk Adjustment program illegally.

“Congress directed CMS to transfer funds between insurers based on the health status of their members,” said Minuteman CEO Tom Policelli. “Instead, CMS created a program that rewards expensive insurance companies who cater to consumers buying expensive products. 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.”

Minuteman says that the government has effectively levied a significant tax on the company and its members just because Minuteman offers a lower cost product. In addition to arguing that the government illegally penalizes issuers with lower premiums, the Complaint also alleges that it penalizes issuers who sell Bronze products and fails to correctly calculate actuarial risk of members. “CMS has created a program that violates the plain text of the Affordable Care Act,” said Minuteman general counsel Susan Brown. “Our lawsuit asks the court to invalidate the illegal Risk Adjustment methodology and institute necessary changes immediately.”

CMS has acknowledged that the federal risk adjustment program needs to be fixed, but those changes will come too late for many issuers and their members. Minuteman has been generating positive cash flows through 2015 and is the only Consumer Oriented and Operated Program (“CO-OP”) member not under a CMS Corrective Action Plan. “Our operating fundamentals are strong. We can afford to make these payments, but that isn’t the point. We cannot continue to allow CMS to take our members’ money illegally and give it to more expensive insurance companies,” said Policelli. “CMS has essentially created a reverse Robin Hood program, which harms consumers, small companies, and taxpayers.”

Minuteman is a founding member of CHOICES, a national coalition formed to support healthcare consumers by advocating for improvements in the current Risk Adjustment program. More information can be found at the CHOICES website (www.choicescoalition.org). Pepper Hamilton LLP prepared the complaint and is representing Minuteman Health in the lawsuit.

About Minuteman

Minuteman Health, Inc. is a member-governed, non-profit health maintenance organization (HMO) committed to removing inefficiencies from today’s health insurance system to provide high-quality care, cut administrative costs and reduce premiums for individuals and businesses in Massachusetts and New Hampshire.

Minuteman Health’s In-Plan Provider network includes over 11,300 hospitals, physicians, and specialists who provide high quality care at lower costs in Massachusetts and New Hampshire. Updates on Minuteman Health’s evolving provider network can be found at www.minutemanhealth.org.

Minuteman is marketed in Massachusetts through its website, brokers, Health Services Administrators (www.HSAinsurance.com) and the Massachusetts Health Connector. It is marketing in New Hampshire through its website, brokers, and the Federal Healthcare Exchange.

Media Contact:
Jim Borghesani


Lisa McTighe
Director of Marketing and Communications



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