Litigation funders have long been vying to get a piece of Obamacare insurance claims, which allege the federal government failed to make good on a host of payments to health insurers. Now that the Supreme Court has decided to hear several of those claims, funders have begun reaching out to insurers with more attractive terms and pricing.
An LFJ Conversation with Michael Kelley, Partner, Parker Poe
Litigation funders have long been vying to get a piece of Obamacare insurance claims, which allege the federal government failed to make good on a host of payments to health insurers. Now that the Supreme Court has decided to hear several of those claims, funders have begun reaching out to insurers with more attractive terms and pricing.
According to Crain’s, the underlying claims involve insurance companies who allege the federal government failed to pay roughly $12bn in aggregate payments promised under the Affordable Care Act. Insurers are bringing so-called ‘risk corridor’ claims, alleging the government’s plan to stabilize premiums by shifting those payments from profitable insurers to less profitable ones failed, leading many insurers into insolvency.
Funders have been interested in insurance claims for years now, typically offering 10 cents on the dollar to purchase the entire claim payout. Last year, however, the U.S. Court of Appeals ruled that the government is not liable, and that sent funders running for the hills. Yet the Supreme Court’s decision to hear several of the risk corridor claims has revitalized interest, and funders are now offering 25 cents on the dollar just for a piece of the backend.
Most health insurers have declined funders’ offers, preferring instead to take their chances with the Supreme Court’s decision. Yet some funders have had luck with insolvent insurers. A prime example here is Juris Capital. The funder with the now-defunct Land of Lincoln Health, which is suing the government for $76MM. Juris had offered millions of dollars in capital in exchange for a portion of the claim proceeds, but backed away from the deal after the Court of Appeals ruling. Now that the Supreme Court is set to hear oral arguments next month, with a verdict expected for June 2020, Juris has struck a deal to fund Land of Lincoln to the tune of $28.9MM for 100% of the claim proceeds, assuming they fall under $57.7MM. Should the payout exceed that amount, Juris will receive even more on the backend.
Funders are also approaching large, solvent insurance companies who may want to offload the risk of a binary Supreme Court decision. It’s unclear how many such claims have been funded, but as the decision date approaches, insurers should expect their phones to continue ringing off the hook.
