WASHINGTON—The Supreme Court agreed June 24 to decide whether the federal government owes $12 billion to insurance companies that have lost money as a result of the “risk corridors” program within the Affordable Care Act, which is commonly known as the Obamacare law.
Republican lawmakers characterize proposed congressional funding to make up for the alleged shortfall as a “bailout” for the insurance industry. A fiscal 2015 federal appropriations bill included a provision forbidding the U.S. Department of Health and Human Services (HHS) from satisfying the risk pool’s obligations out of general funds.
The “risk corridors” program was designed to discourage insurers in the new health care marketplaces from focusing on healthy customers in need of little health care. It was supposed to provide a buffer for insurers so they wouldn’t have to dramatically boost premiums in the first three years of Obamacare, but the money paid into the pool quickly ran out, leaving affected insurers high and dry.
Three separate cases, Maine Community Health Options v. U.S., Moda Health Plan Inc. v. U.S., and Land of Lincoln Mutual Health v. U.S., have been consolidated by the court and will be heard together.
In its brief, Moda Health Plan, of Portland, Oregon, said the $12 billion shortfall in payments to insurers “alone cries out for this Court’s review.”
The company accused the government of “egregious disregard for its unambiguous statutory and contractual commitments” and said it is trying to “avoid both financial and political accountability for depriving private parties of billions in reliance interests.”
“We remain confident that the court will ultimately hold the government to its promise to pay those companies, including Moda, who answered the government’s call to provide access to affordable health care for the neediest of Americans,” Moda CEO Robert Gootee said in a statement to reporters.
As petitioner Maine Community Health Options of Lewiston, Maine, explained in a brief, the Affordable Care Act of 2010 sought to encourage insurer participation in health insurance exchanges by mitigating some of the uncertainty associated with insuring formerly uninsured customers.
To reduce risk, lower premiums, and encourage insurers to participate, Section 1342 of the law created a three-year “risk corridors” program designed “to protect against uncertainty in rate setting by qualified health plans sharing risk in losses and gains with the Federal government.”
“The program was modeled after a similar program under Medicare Part D, and was to be administered by [HHS]. It was mandatory for all participating insurers.”
With the “risk corridors,” profit-making insurers paid into a pool that would benefit insurers that ran into higher-than-anticipated expenses.
In 2014, Congress approved a rule change whereby the “risk corridors” program had to be revenue-neutral, meaning payments from the pool could only come out of monies paid into it.
The same year, the Centers for Medicare and Medicaid Services, which is part of HHS, declared it would pay insurers only 12.6 percent of what they sought from the program, which resulted in a rash of lawsuits as insurers failed to receive the payments they had counted on.