SCOTUS Rules Feds Owe Payers $12B in 'Risk Corridor' Payments.

Monday's 8-1 ruling by the high court overturns a 2018 ruling from a federal appeals court.

The U.S. Supreme Court on Monday reversed an appeals court and said in an 8-1 ruling that the federal government must pay the $12 billion it owes health insurance companies that took part in the Affordable Care Act's "risk corridor" program.

"We conclude that §1342 of the Affordable Care Act established a money-mandating obligation, that Congress did not repeal this obligation, and that petitioners may sue the Government for damages in the Court of Federal Claims," Justice Sonia Sotomayor wrote in the court's opinion.

Speaking on background, a spokesperson for Health and Human Services said the department "is disappointed in the court's ruling."

"The "risk corridors" were a concession that the Obama administration made to health insurers who were wary of participating in the ACA's online exchanges that had removed critical enrollment eligibility restrictions such as a ban on pre-existing conditions.

The consolidated case—which was brought separately by Maine Community Health Options, Moda Health Plan Inc., and Land of Lincoln Mutual Health Insurance Co.—argue that the risk corridor obligated HHS to make payments for years 2014-2016 that the law intended "to induce insurer participation in the health insurance exchanges by mitigating some of the uncertainty associated with insuring formerly uninsured customers."

The payers had contended that because the amounts collected under the risk corridor program for 2014 "came nowhere close to what the government owed to insurers," the government paid out only 12.6% of the total owed for the year, prorating the funds it owed to each insurer.

Both the Obama and Trump administrations had argued that because Congress between 2015 and 2107 limited payments for the risk corridor program, the federal government had no obligation to pay.

Writing in dissent, Justice Samuel Alito said the majority's ruling "has the effect of providing a massive bailout for insurance companies that took a calculated risk and lost. These companies chose to participate in an Affordable Care Act program that they thought would be profitable."

Plaintiffs' attorney Mark Rust, who advised Land of Lincoln, said the ruling "has made it possible to trust in government promises, even if they are broken in the midst of discord and dis-function."

"Even though the delay in appropriations cost Land of Lincoln its business, at least the people of the state of Illinois are going to be made whole by the aggressive actions here of its liquidator," he said. "It should help all of us trust in the letter of the law again."

Monday's ruling by the high court overturns a 2018, 2-1 ruling from the U.S. District Court of Appeals for the Federal District, which had ruled that "although section 1342 obligated the government to pay participants in the exchanges the full amount indicated by the formula for risk corridor payments, we hold that Congress suspended the government's obligation in each year of the program through clear intent manifested in appropriations riders."  

The appeals court also rued that "the circumstances of this legislation and subsequent regulation did not create a contract promising the full amount of risk corridors payments."

Payers Cheer Ruling

America's Health Insurance Plans CEO Matt Eyles said the federal government was attempting to renege on "a clear commitment in the interest of building stable markets and making coverage more affordable for individuals and small employers."

"Health insurance providers kept their commitments while incurring substantial losses," Eyles said. "We appreciate that today’s Supreme Court 8-1 decision ensures that the federal government honors the obligations it made for services the private sector already delivered."

Margaret A. Murray, CEO of the Association for Community Affiliated Plans, said the ruling "upholds the integrity of the full faith and credit clause. It emphasizes the argument we have made all along—the government can't renege on an unambiguous commitment in federal law."

“ACAP-member plans entered the Marketplace with the clear understanding that risk corridor payments would take place as set forth in Federal law," Murray said. "The government reneged, but our plans didn't. They provided quality, affordable care to millions of Americans only to have the government leave them unpaid bills totaling hundreds of millions of dollars."

Murray said allowing the government to renege on its debts would have created a dangerous precedent.

"It's absurd to ask health plans – or anyone else doing business with the United States government – to price in the notion that Congress might arbitrarily walk away from commitments it makes in Federal law," she said. "We're relieved the Supreme Court agrees."