A handful of health insurers is slated to argue before the U.S. Supreme Court on Tuesday that the federal government owes the insurance industry more than $12.3 billion in outstanding Obamacare program funds.
While legal experts say the law is on the insurers' side, there's a chance insurers will come up empty handed even if the high court rules that they are owed the "risk corridor" payments. Should insurers receive any award, the individuals enrolled in their health plans are unlikely to benefit much through either lower premiums or rebates under the Affordable Care Act's medical loss ratio rules, experts said.
Because of the timing of a decision alone, any cash insurers receive " will have absolutely no ability to affect premiums for the 2021 plan year because it won't be credited as an asset until after premiums are set," said David Anderson, a research associate at Duke University's Margolis Center for Health Policy.
The Affordable Care Act's temporary risk corridor program was meant to help keep premiums stable by protecting health insurers from significant financial losses in the early years of the ACA insurance exchanges. The government collected payments from insurers that did well and distributed payments to those with high losses. A similar program exists in Medicare Part D, which was created by Republican President George W. Bush.
Congress, however, limited the amount of payments that the government could pay out through appropriations riders in 2015 and 2016 that altered the program to be budget neutral. At the heart of the insurers' case is whether those riders erased the federal government's obligation to pay up.
The government argues it is not required to make risk corridor payments because funds were not appropriated for that purpose. Four insurers involved in three consolidated lawsuits will argue before the justices that the obligation remains.
It's hard to predict how the justices, who agreed in June to hear the cases, will rule. The lower courts have split on the issue, with the U.S. Court of Appeals for the Federal Circuit concluding that the insurers aren't owed any money because the appropriations riders suspended the government's obligation.
But Nick Bagley, a law professor at the University of Michigan Law School who has written extensively about the lawsuits, said the insurers have a solid argument and "a decent shot at winning" in the Supreme Court. The appropriations riders, Bagley has argued, do not change the underlying promise that the ACA made to insurers.
Insurance companies and their lawyers also feel optimistic about their chances; they doubt the Supreme Court agreed to hear the case simply to affirm the Federal Circuit's decision in favor of the federal government. Insurers view the increasing interest in their lawsuits among specialized investors as an endorsement of their case.
But there's a wrinkle that could stand in the way of a big payday even if the insurers win. If the Supreme Court rules in the insurers' favor, the remaining hurdle is the availability of the judgment fund, a permanent appropriation that exists to pay court judgments and settlements of lawsuits against the federal government.
"Congress presumably could try to amend the availability of the judgment fund appropriation so these amounts don't get paid," said Michael Kolber, a partner at Manatt Health, the healthcare legal and consulting group of Manatt, Phelps & Phillips. "This case is purely an issue of statutory interpretation, so while the Supreme Court's word is essentially final with respect to what existing statutes mean, Congress can amend those statutes."
Beyond the judgment fund appropriation, Congress could also amend the ACA's risk corridor provision, Kolber said. Republican lawmakers in the past have floated bills—one introduced in 2016 by Sen. Ben Sasse, (R-Neb.), was titled the HHS Slush Fund Elimination Act—to prevent the HHS from settling the lawsuits with federal funds, including from the judgment fund.
Some have also suggested that the text regarding the fund states it is available only if no other source exists to pay the awards. Despite these potential obstacles, Bagley noted that insurers are "overwhelmingly likely" to get the payments if the Supreme Court rules they are entitled to them.
That doesn't mean any of the payments will trickle down to the health insurers' plan members in the form of lower premiums.
"I think that would probably be a question of state law," said Timothy Jost, an ACA expert and emeritus law professor at the Washington and Lee University School of Law. "My inclination would be to think that states would not consider this as a reason to adjust premiums."
Duke's Anderson explained that if a decision in favor of the insurers comes down in May or June, insurers would likely receive the money in August or later — after they set their premiums for 2021.
Whether plan members would receive rebates under the ACA's medical loss ratio rule, which requires that insurers must spend at least 80% of every premium dollar on medical care and quality improvement, would depend on how the cash is treated on the balance sheet, Anderson said. If the awards are treated as a one-time cash infusion, it potentially "could lead to incrementally higher MLR rebates going forward," he said.
But some of the companies involved in the lawsuits are now shuttered, including most of the ACA health co-ops who closed their doors years ago at least in part because they didn't receive promised risk corridor funds. Those awards would likely go to state guaranty associations or hedge funds and other entities that bought the insurers' assets, rather than to actual members, Anderson said.
Plan members are also unlikely to see any rebates if the awards are credited to the 2014 to 2016 plan years when the risk corridor program was still alive, he said. That's because health insurers' medical loss ratios were already so high that the court awards wouldn't make a difference, Anderson said.