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Appeals court rules against insurers' case for billions in risk corridors payments

Between 2014 and 2016, total payments fell short by more than $12 billion.

Susan Morse, Managing Editor

A federal appeals court has ruled against health insurers and their attempt to get risk corridors payments promised in the Affordable Care Act.

Between 2014 and 2016, total payments fell short by more than $12 billion, according to court documents.

Moda Health Plan brought the lawsuit in 2016 seeking $209 million, the balance of the money it said it was owed by the Department of Health and Human Services.

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Dozens of other insurers filed similar motions with mixed results.

In a 2-1 decision Thursday, the United States Court of Appeals for the Federal Circuit denied Moda's claim, ruling that Congress's intent was to prevent the use of taxpayer funds to support the risk corridors program. 

No one from Moda could be immediately reached for comment.

Originally, the Court of Federal Claims denied the government's motion to dismiss and granted Moda's motion for partial summary judgement. 

Moda claimed that the government failed to pay the full amount it was owed in risk corridors payments. The program was among three, the others being reinsurance and risk adjustment, set up under the Affordable Care Act to help insurers mitigate potential losses for offering plans in the marketplace.

Under the three-year risk corridors program, the government was to pay insurers that took on higher claim costs. The Department of Health and Human Services collected money from plans that had lower than expected claims to pay those with higher costs, for a net neutral budget.

The idea was that without having data on the risk of individuals who would get an ACA plan, insurers would keep premiums low knowing they would be paid by the government for high claim costs.

But HHS ran out of funds.

In 2015, CMS had collected $362 million but needed to pay out $2.87 billion, according to court records. Insurer payments were prorated at 12.6 percent, with the shortfall to be made up the following year.

Congress wouldn't appropriate additional funds because legislators said HHS stated the program would be budget neutral.

The judges based their ruling on this argument and said the agreement between HHS and insurers was not a contract.

Dissenting Judge Pauline Newman said the government was avoiding its obligation to pay the bill.

Twitter: @SusanJMorse
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