UnitedHealthcare said it is evaluating its options after a federal judge in New York dismissed a lawsuit brought by the insurer and Oxford Health Insurance against the state Department of Financial Services over the constitutionality of risk adjustment payments.
"We respectfully disagree with the court's decision and are evaluating our options," UnitedHealthcare said by statement.
The insurers filed the lawsuit last year over a modification to the federal risk adjustment program implemented by the U.S. Department of Health and Human Services in New York. The regulation allowed DFS Superintendent Maria Vullo to collect up to 30 percent of funds received from insurers and redistribute them to other insurers based on the state's own methodology, according to the New York Law Journal.
The insurers said the methodology used by the state was an unconstitutional taking of their property, according to the court decision of August 11. UnitedHealth and Oxford said the DFS did not have the authority to take their funds and redistribute them, as the state regulation is preempted by the federal risk adjustment program.
U.S. District Court Judge John Koeltl of the Southern District of New York disagreed, saying the U.S. Department of Health and Human Services allows states to adjust the federal program. The judge granted the state's motion to dismiss.
"DFS is pleased that the federal court has recognized the superintendent's authority to promulgate New York's health insurance risk adjustment regulation and to enforce state law through regulation to protect New York's markets and consumers," Vullo said by statement. "This decision correctly upholds New York's regulatory insurance authority and clearly affirms that New York's continued enforcement of New York insurance law and regulation is not preempted by federal law."
Risk adjustment, established under the Affordable Care Act, is a budget neutral program that collects payments from insurers in the market and redistributes the funds to payers that cover higher risk individuals.