Ed. note: This is a sponsored article by Lake Whillans.
Lake Whillans is providing financial relief to insurance companies that offered plans on the Affordable Care Act’s health insurance exchanges and are now impaired by the government’s delay in making promised so-called “risk corridor payments.”
To incentivize insurers to take part in the exchanges, the ACA provided that, for the first three years of the exchanges, there would be limits on how much money could be lost—or made—by exchange participants. The federal government would reimburse out-sized losses, while insurers would pay over out-sized profits. Legislators hoped that payments made by profitable insurers would be sufficient to fund the payments due to insurers that suffered losses.
Unfortunately, it hasn’t quite worked out that way so far. When the results were tallied for 2014, risk corridor payments due to insurers exceeded the payments received from insurers by approximately $2.5 billion, and there was no federal appropriation to address the shortfall. Instead, the government paid risk corridor payments only up to the amounts it had received (resulting in payments of $0.126 on the dollar) and rolled the remaining amounts due forward to be paid in the subsequent year(s). While 2015 results have not come in, it is expected that any shortfalls will be addressed the same way.
Some insurers have sued, and others may follow. The insurers argue the government is obligated to make the full risk corridor payments due each year, while the government argues that the claims cannot be ripe until the program runs its three-year course and all risk corridor payments are exchanged.
While insurers wait to be made whole through subsequent payments and/or litigation, the unpaid reimbursements are causing some financial strain. Their capital balances are dwindling because the reimbursements they expected haven’t come in. And in some states, regulatory agencies have required these insurance companies shore up their balance sheets by the end of this month in order to continue writing policies.
That’s where Lake Whillans, a litigation finance and distressed venture capital firm, can help. We can provide the capital these insurers need to ride out the reimbursement delay in exchange for the right to future proceeds from litigation or other resolution of the outstanding risk corridor payments.