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A judge on Thursday declined a request from Arkansas Blue Cross and Blue Shield that he lift a federal agency's sanction preventing the company from enrolling new customers in its Medicare prescription drug plans during the annual sign-up period that starts Sunday.

In a lawsuit filed Tuesday, the company contended that the regulation triggering the sanction stemmed from a misinterpretation by the Centers for Medicare and Medicaid Services of an amendment to the 2010 Patient Protection and Affordable Care Act.

The agency cited the amendment in 2013 when it issued a regulation requiring insurers to spend at least 85 percent of the money they collect in drug plan subsidies and premiums on customers' drug expenses, rather than administrative expenses or profits.

Companies that fail to meet the required spending ratio, known as a medical loss ratio, for three consecutive years are barred from enrolling new customers in drug plans for one year.

At a hearing Thursday, an attorney for Arkansas Blue Cross and Blue Shield argued that the loss ratio requirement wasn't intended to apply to stand-alone prescription drug plans.

Instead, said attorney Michael Kolber of the Los Angeles-based firm Manatt, Phelps and Phillips, Congress intended the requirement to only apply to Medicare Advantage plans, which cover medical benefits and also often cover prescription drugs.

U.S. District Judge Leon Holmes ruled Thursday that the 2010 law, the Health Care and Education Reconciliation Act, was unclear on the issue, but that the federal agency's interpretation was reasonable.

Quoting a 1984 U.S. Supreme Court ruling that established a standard for when agency rules can be overturned, Holmes wrote, "The court need not conclude that the agency construction was the only one that permissibly could have [been] adopted to uphold the construction, or even the reading the court would have reached if the question initially had arisen in a judicial proceeding."

Rather, the Supreme Court said in that case, the only question is whether the agency's "interpretation of the statute is a reasonable one," Holmes wrote.

A spokesman for the Little Rock-based insurer didn't return a call late Thursday seeking comment on Holmes' ruling, including whether the company plans to appeal.

The company appears to be the first and only insurer in the country to face a suspension in its drug plan enrollment over the medical loss ratio requirement, which first took effect in 2014.

The suspension won't affect the 38,000 people now covered by an Arkansas Blue Cross and Blue Shield drug plan, but it will prevent new customers from signing up during the enrollment period that starts Sunday and runs through Dec. 7.

At Thursday's hearing, Kolber said the sanction means the company won't be able to replace customers who die or switch to other companies' plans.

And since some administrative costs are fixed, the loss in enrollment would make it more difficult for Arkansas Blue Cross and Blue Shield to meet the loss ratio requirement in future years, he said.

He noted that the Health Care and Education Reconciliation Act calls for the termination of contracts with plans that fail to meet the target for five years in a row, meaning the suspension could be "potentially fatal" to the company's drug plan business.

Arguing that the loss ratio requirement shouldn't be applied to drug plans, Kolber noted that it was contained in a section of the 2010 law, titled "Savings from limits on [Medicare Advantage] Plan administrative costs," that doesn't mention drug plans.

In applying the requirement to drug plans, the Centers for Medicare and Medicaid Services officials cited a provision in the 2003 law that created the Medicare drug benefit.

That law says that certain requirements for Medicare Advantage plans also apply to stand-alone drug plans. The 2010 law added the minimum loss ratio provision to the section of the law that contains those requirements.

Kolber said requirements to Medicare Advantage plans added after the 2003 law was passed shouldn't automatically apply to drug plans.

The 2010 law was passed amid "concerns about the administrative costs and the profits of Medicare Advantage plans," he said. "There was no discussion of [drug] plans in that context."

Charles Bailey Jr., an attorney with the U.S. Department of Health and Human Services' office of general counsel, countered that Congress would have included language in the 2010 law exempting the drug plans from the medical loss ratio requirement if that's what lawmakers had intended.

Of the 615,000 Arkansans covered by the insurance program for the elderly and disabled, about 308,000 are enrolled in stand-alone drug plans and 120,000 are in Medicare Advantage plans with drug coverage, according to the Centers for Medicare and Medicaid Services.

Although 11 companies offer Medicare drug plans in the state, Arkansas Blue Cross and Blue Shield is the only one based in Arkansas.

In 2014, the first year the loss ratio requirement took effect, Arkansas Blue Cross and Blue Shield had a medical loss ratio of 79.8 percent and was forced to refund $2.9 million to the federal government, Bailey said during the hearing.

The company refunded $2.3 million of what it collected in 2015, when its loss ratio was 81.3 percent, and almost $608,000 from last year, when its ratio was 84 percent.

Company spokesman Max Greenwood said this week that the company overestimated what it would "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.

Metro on 10/13/2017

Print Headline: Insurer's Rx-plan penalty upheld

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