Supreme Court Rules in Favor of Health Insurers Under ACA Program
April 29, 2020 | Affordable Care Act | Litigation | Private InsurersOn April 27, the U.S. Supreme Court ruled in favor of commercial health insurers that were seeking $12 billion under the Affordable Care Act’s risk corridor program, acknowledging that the ACA “obligated the government to pay the full amount of risk corridor payments.”
The ACA established the risk corridor program to mitigate the risks assumed by insurance companies participating in the ACA’s health insurance exchanges, or marketplaces, without knowing the consumer demand for their affordably priced policies. In consideration for their participation, under the program the federal government would limit the insurers’ gains and losses from their policies sold in the marketplaces from 2014 through 2016. Specifically, the companies would pay a portion of their profits to the federal government if their premiums exceeded their claimed medical expenses; however, if premiums fell short of medical expenses, the companies would be entitled to receive payments from the government.
Congress subsequently enacted a series of appropriation riders that banned the promised payments under the risk corridor program. Early participants in the ACA’s marketplaces were hurt the most, as they incurred significant losses. As a result, Moda Health, Maine Community Health Options, Land of Lincoln Mutual Insurance Co. and Blue Cross Blue Shield of North Carolina sued the federal government for the payments owed to them under the program.
The Court stated that its decision reflects “a principle as old as the nation itself: The government should honor its obligations.” Congress could have limited the government’s financial exposure under this program, as it did with other provisions of the ACA, but it did not do so. The Court added, “the plain terms of the risk corridor provision created an obligation neither contingent on nor limited by the availability of appropriations or other funds.” In light of the Court’s decision, billions of taxpayer dollars will have to be paid to the plaintiff insurance companies even though Congress has declined to appropriate money to fund the risk corridor program.
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