Supreme Court Hears ACA 'Risk Corridor' Case

Insurers say they are owed $12 billion in payments that were supposed to buffer losses on ACA exchange policies
Robert Calandra

The Supreme Court heard the latest ACA case on Tuesday. This one will determine the fate of “risk corridors” payments to insurers.

The payments were designed to lure risk-averse insurers to participate in the new ACA exchange markets. Under Section 1342 of the ACA, during the first three years of the exchanges, participating insurers whose costs exceeded the premiums they collected would receive payments from the federal government. The cost of those payments to the federal government were supposed to be at least partially offset by payments to the government by insurers whose exchange market costs were less than the premiums they collected. As it turned out, far more risk-corridor money would have been paid out than paid in.

Republicans, led by Sen. Marco Rubio, the Republican from Florida, decried the risk corridor payments as a slush fund for the health insurance industry and stripped it out of a budget bill signed by President Obama. Machinations to fund the payments in some other way got started but were shut down by the Trump administration.

The insurers who brought the lawsuit that resulted in this week’s Supreme Court case say the industry is owed $12 billion—and that the federal government reneged on a promise.

“This case warrants comparison to Lucy Van Pelt pulling the football away from Charlie Brown — with our nation’s government cast as the capricious bully,” wrote the Association for Community Affiliated Plans, an industry group representing nonprofit health plans, in an amicus brief to the Supreme Court.

The Scotusblog summarized some of the individual claims of the companies whose cases have been combined  in this appeal to the country’s highest court:

"The federal government owed one of the insurers involved in this case, Moda Health Plan, over $200 million for 2014 and 2015. When it didn’t receive payments from the government, Moda withdrew its participation in the exchanges in Washington and Alaska. Blue Cross and Blue Shield of North Carolina was owed $130 million for 2014, with that number rising to more than $215 million for 2015. Maine Community Health Options, which offered coverage on the Maine and New Hampshire exchanges, was owed more than $22 million for 2015 and more than $35 million for 2016. Another insurer involved in the proceedings before the Supreme Court, Land of Lincoln Mutual Health Insurance Company, went out of business in 2016 after the government failed to pay it; “nearly 50,000 policyholders in Illinois lost their health insurance as a result.” Land of Lincoln was owed nearly $4 million for 2014, $70 million for 2015 and $53 million for 2016."

Ephrat Livni, writing for Quarz, said one legal principle case may hinge on is the “presumption against retroactivity.”

“In other words, just because the government didn’t fund the program and hinted that it would no longer exist doesn’t mean it’s off the hook,” wrote Livni. “The law views it as bad practice to approve of “calling backsies” with the benefit of hindsight.”