The U.S. Supreme Court ruled Monday that health insurers are owed more than $12 billion in unpaid funds under a now-expired Affordable Care Act program.
The high court ruled 8-1 that the federal government has an obligation to pay insurers funds owed under the ACA temporary risk-corridor program. It reversed the judgments of the lower court and remanded the consolidated cases brought by four insurers for further proceedings. The Supreme Court lawsuit is known as Maine Community Health Options v. United States.
The court held that a provision of the ACA "established a money-mandating obligation, that Congress did not repeal this obligation, and that petitioners may sue the government for damages in the Court of Federal Claims," according to the majority opinion, written by Justice Sonia Sotomayor.
"These holdings reflect a principle as old as the nation itself: The government should honor its obligations," Sotomayor wrote.
The ACA risk-corridor program was established to keep insurance premiums stable by protecting insurers from significant financial losses during the first three years of the public insurance exchanges. The government would collect payments from insurers that did well and distribute payments to those with high losses.
But the government did not pay the full amount. It argued that Congress erased its obligation by passing appropriations riders in 2015 and 2016 that effectively altered the risk-corridor program to be budget-neutral. It also argued that funds were not appropriated for the risk-corridor program beyond what it collected from profitable health plans.
The justices disagreed and found that the risk-corridor statute of the ACA imposed an obligation through its use of the mandatory language "shall pay," and that obligation was not contingent on appropriations.
Further, the majority held that Congress did not repeal the obligation by implication through appropriations riders. It explained that canceling an obligation requires more than an omission of an appropriation, and Congress did not show clear congressional intent to repeal the statutory obligation.
The court noted that Congress enacted appropriations riders only after it had already begun incurring the previous year's risk-corridor obligation. Moreover, HHS' and CMS' statements at the time showed that they understood that their obligation to pay up wouldn't be eliminated in the event of program shortfall.
"An implied-repeal-by-rider must be made of sterner stuff," Sotomayor wrote.
The Supreme Court concluded that the insurers can sue the federal government to collect unpaid risk-corridor funds in the U.S. Court of Federal Claims.
Justice Samuel Alito was the lone dissenter. He argued that federal law did not give insurers the right to sue for damages if they were to recover payments.
"Under the court's decision, billions of taxpayer dollars will be turned over to insurance companies that bet unsuccessfully on the success of the program in question. This money will have to be paid even though Congress has pointedly declined to appropriate money for that purpose," Alito wrote.
The four insurers involved in the consolidated cases include Maine Community Health Options, Blue Cross and Blue Shield of North Carolina, Land of Lincoln Health and Moda Health Plan.
In a statement, a spokeswoman for not-for-profit Maine Community Health Options said the ruling is "a win for our membership of individuals, families and businesses."
"We paid into the risk corridor program in our first year of operations, but when it came time for the risk corridor program to offset some of our losses in 2015 and 2016, the government yanked away that mitigation in defiance of the law. The Supreme Court's verdict is a vindication of the rule of law and should restore faith that a contract with the government is not by itself a risky undertaking," she wrote.
Blue Cross of NC said the ruling should narrow its losses during the first three years of the ACA exchanges from $450 million to $100 million.
"We are grateful for a ruling that requires the federal government to follow through on the promise of the risk-corridor program. Any funds that Blue Cross NC receives as a result of today's ruling will be used in the way that best benefits our members," the insurer said.
Dozens of health insurers sued to recover risk corridor funds, including a class action with more than 100 health insurers. The failure of the federal government to pay out the full amount of the funds owed under the program was devastating to some health plans and caused many of the ACA health co-ops to shut down, including the now-shuttered Illinois co-op Land of Lincoln Health.
"We appreciate that today's Supreme Court 8-1 decision ensures that the federal government honors the obligations it made for services the private sector already delivered," said Matt Eyles, CEO of the insurance industry trade group America's Health Insurance Plans.
"It's absurd to ask health plans — or anyone else doing business with the United States government — to price in the notion that Congress might arbitrarily walk away from commitments it makes in Federal law. We're relieved the Supreme Court agrees," said Margaret Murray, CEO of the Association for Community Affiliated Plans.
