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Supreme Court hears case over $12 billion insurers say they are owed in risk corridor payments

In a move insurers considered a bait and switch, Congress limited the funding available to compensate insurers for their losses.

Susan Morse, Managing Editor

The Supreme Court today is scheduled to hear oral arguments over risk corridor payments insurers say they are owed by the federal government.

Insurers argue the government owes them $12 billion in back payments for losses from participating in Affordable Care Act plans. The ACA promised the funds for three years, from 2014 to 2016.

Republicans in Congress balked at spending funds they had never authorized. In a move insurers considered a bait and switch, Congress limited the funding available to compensate insurers for their losses. Risk corridors became budget neutral. Insurers were paid only part of what they were owed.

In 2017, the Centers for Medicare and Medicaid Services said it still owed insurers $12 billion in retroactive risk corridor payments.

The government's argument is that the ACA left the funding option open and that Congress would never intend to leave the government on the hook for billions of dollars.

The question being considered is whether a temporary cap on appropriations may be construed to do away with retroactive payment obligations, when insurers have already performed their part of the bargain under the statute.

WHY THIS MATTERS

At stake is billions of dollars insurers say they are owed for keeping premiums affordable during the early years of the Affordable Care Act market.

The lawsuit was brought by Maine Community Health Options, Moda Health Plan and Land of Lincoln Mutual Insurance Company. The separate cases have been consolidated.

The case has gone through the Court of Federal Claims and the U.S. Court of Appeals for the Federal Circuit. On appeal, the Federal Circuit determined the government had no further financial obligation.

Insurers brought their case to the Supreme Court, which agreed earlier this year to hear oral arguments.

THE LARGER TREND

Risk corridors was one of three programs established under the ACA to provide financial stability and incentive for insurers to enter the market.

Reinsurance, which was also established for three years, provided payment to plans that enrolled higher-cost individuals. The third program, risk adjustment, was set up to become a permanent redistribution formula to fund plans with higher-risk enrollees from plans that had lower-risk members.

Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com