Justices to hear ObamaCare case with billions at stake

Justices to hear ObamaCare case with billions at stake
© Greg Nash

The Supreme Court on Tuesday will hear oral arguments in the latest ObamaCare case to reach the justices, this time in a $12 billion dispute over payments insurers say they are owed by the federal government.

At issue is a financial carrot that Congress dangled before insurers to encourage their participation in the early years of the Affordable Care Act's (ACA) health care marketplaces. The funding program in question, known as risk corridors, sought to mitigate risk by protecting insurers against unforeseeable losses in the new markets.

But Republicans later passed a measure that sharply reduced the amount of funds available for reimbursement payments, sparking legal challenges.


“At its core, this isn’t really a case about health policy,” Christen Linke Young, a fellow at the Brookings Institution, told The Hill. “It’s a case about whether or not the government keeps its word.”

It marks the fifth time the high court is weighing in on ObamaCare. And while this time the fate of the law itself is not in the balance, the case still has high stakes for insurers and for the Trump administration, which could find itself in the awkward position of having to pay out billions even as it fights to end the law.

When Congress passed the ACA in 2010, they made it illegal to deny coverage or charge higher premiums for people with preexisting conditions or others who could potentially be costly to insure.

This made it difficult for providers to know how much to charge in premiums to cover their expenses. To offset market uncertainty, Congress included several financial cushions for insurers who agreed to participate in the new individual and small group markets.

“The architects of the ACA, who wanted to get more plans offering coverage, knew [the risks] and promised insurers they would commit to ... premium stabilization,” said Sayeh Nikpay, a health economist and professor of health policy at Vanderbilt University.

Under the risk corridor program, the government agreed to reimburse certain expenses borne by insurers whose costs were higher than expected. At the same time, insurers with lower-than-expected costs were required to pay a portion of their profits into the risk corridor fund.

The program was designed to cover the first three years of the government exchanges, from 2014 to 2016, under a reimbursement formula laid out in the ACA.

Sen. Marco RubioMarco Antonio RubioSenate GOP campaign arm outraises Democratic counterpart in September House passes bills to secure telecommunications infrastructure Senators call for answers from US firm over reported use of forced Uyghur labor in China MORE (R-Fla.) was a leader of the GOP effort to kill the risk corridors, which he and other critics said would effectively act as a "taxpayer-funded bailout" of insurers.

Starting in 2015, the Republican-led Congress passed measures in appropriations bills that altered the repayment scheme. They limited the available funds only to what was paid into the risk corridor fund by relatively profitable insurance companies. In effect, that meant Congress would not appropriate new funds to reimburse the insurers, as the industry expected.

The insurance companies noted that 18 of the 24 providers affected by the payment restructuring went out of business, while several others dropped out of the exchanges. By 2017, only a half-dozen remained, and those who did were required to raise their premiums.

A number of insurance providers sued, arguing that Congress was bound to make the much more generous payout under the ACA formula.

The insurers told the Supreme Court that the change in terms amounted to “a bait-and-switch of staggering dimensions in which the government has paid insurers $12 billion less than what was promised.”

The companies urged the justices not to read the appropriations bills as having been intended to repeal the ACA’s promise of a larger reimbursement, noting that the changes came about through policy riders to spending bills. They argued that if Congress sought to cancel the program, the lawmakers should have done so explicitly.

“Intuitions about Congress’s intentions are no substitute for statutory text,” Maine Community Health Options wrote in a brief to the high court. “Citizens should be able to presume that the federal government, Congress included, is bound by the law as written and will pay its bills.”

The Supreme Court has consolidated the case Maine health care providers have brought with similar suits from Moda Health Plan Inc. and Land of Lincoln Mutual Health Insurance Co.

The government prevailed in each lower court decision, save for one that was later reversed. In that case, a three-judge panel of the U.S. Court of Appeals for the Federal Circuit reversed a trial court decision in favor of Moda Health Plan, which found that the government had failed to comply with its ACA obligation and breached an implied contract.

As the insurance companies appeal to the Supreme Court, a number of interested parties have rallied to their cause.

The U.S. Chamber of Commerce, the Association of Community Affiliated Plans and the National Association of Insurance Commissioners have each filed amicus briefs on behalf of the insurance companies.


The Chamber has long opposed ObamaCare but says the government must fulfil its promise to insurers.

"The decision below, if left uncorrected, will have far-reaching consequences for myriad areas in which U.S. businesses partner with the federal government to provide vital goods and services,” wrote the Chamber of Commerce in its brief. “Businesses make substantial financial investments to participate in these federal programs, and their willingness to do so is based on having assurance that the government will honor its statutory commitments.”

But the U.S. solicitor general, which is defending the government in the case, says the ACA risk corridor provision gave Congress room to maneuver.

Lawmakers left such determinations up to “the ordinary appropriations process through which Congress generally funds government programs via annual appropriations acts,” solicitor general Noel Francisco told the justices in a brief.

Young, of the Brookings Institution, said that while the case is mostly backward-looking in nature, involving a financial dispute over a discontinued government program, it still has important implications for future public-private partnerships.

“If the Federal Circuit’s decision were allowed to stand,” she said, “other private sector entities who want to partner with the government across a range of programs would need to think twice about whether the government will meet its obligations.”

Nathaniel Weixel contributed.