U.S. Supreme Court justices came down hard on the federal government Tuesday in a case over whether it owes insurers more than $12 billion in Affordable Care Act payments.
Several of the justices seemed skeptical of the government's argument that it doesn't have to make risk-corridor payments to insurers that provided ACA exchange plans because Congress later decided not to appropriate the funds.
The government doesn't have an obligation to pay insurers risk-corridor payments because it doesn't have a contract with insurers, and the law doesn't mandate HHS to make the payments, deputy solicitor general Edwin Kneedler argued.
But Justice Elena Kagain said Congress "induced" payers to participate in the ACA exchanges when it created the risk-corridor program.
Similarly, other justices took notice of the incentives for insurers.
"(It was) a good business opportunity for (insurers) because the government promised to pay," Chief Justice John Roberts said.
Insurers were willing to offer ACA exchange plans to people who had preexisting conditions or were uninsured because Congress promised that the federal government would insure them against outsized financial losses through the risk-corridor program, argued Paul Clement, a partner at Kirkland & Ellis who represented insurers in the appeal.
"This case involves a massive government bait-and-switch and the fundamental question of whether the government has to keep its word," Clement said.
Kneedler disagreed, noting that Congress gave the HHS secretary instructions on which funds the agency could use to pay out risk-corridor payments. But the provision didn't mean HHS was obligated to shell out the funds because the legislation is not a contract, he said.
That argument didn't sit well with some of the justices who thought that insurers had a reasonable expectation that the federal government would provide them with a backstop against financial losses because Congress said in a statute that it would.
"So why does the government not have to pay its contracts, just like anybody else?" Justice Stephen Breyer said. "They didn't say they wouldn't pay ... end of the case."
The government was arguing that when Congress promises to pay for something, "they don't really mean it," Breyer said. The justices questioned what Congress was trying to do when it created the risk-corridor program.
"What policy, constitutional or otherwise, would be served by a rule that says a (government employee) can make the United States pay the money, but the Congress of the United States, House and Senate, signed by the president, cannot ... does not?" Justice Breyer said.
Some of the justices were also skeptical that Congress intended to overturn the government's obligation to pay insurers when it didn't appropriate the funds because they never repealed the risk-corridor provision of the ACA, even though they had an opportunity. Congress knows how to write a law that is conditional on appropriations and it never said that the risk-corridor payments were conditional, Justices Kagan and Brett Kavanaugh said.
"So whatever they did, it didn't repeal the ... risk corridors obligation," Justice Ruth Bader Ginsburg said.
Another issue at stake was whether the risk-corridor payments were for services to the government or on behalf of people shopping for qualified health plans on the ACA exchanges. Insurers didn't offer policies on the ACA exchanges solely because of the risk-corridor payments, Kneedler said, citing their other business interests including subsidies and market opportunities.
But Justice Kagan noted that Congress compelled insurers to offer services that were "materially different" from what they would have if the risk-corridor program didn't exist.
Plus, the payments didn't directly subsidize coverage for people buying exchange-based plans. Insurers had to lose money in order to qualify for risk-corridor payments, Clement said. They didn't get them for merely issuing the policies, so it was an insurance program, not a subsidy, he argued. Payers were pressured into offering plans with lower premiums by Congress' promise to pay, said Justice Kavanaugh.
"What could be worse than getting an insurance policy and at the point that you actually suffer a loss and try to make a claim (they say they won't pay out)," Clement said.
Justice Kagan took issue with the government's argument that insurers had to pay into the risk-corridor fund but the government didn't need to reimburse those that lost money selling exchange based plans. The government will only pay out if "we feel like it," she said.
"What kind of statute is that?" she said.