Molina Health rul­ing a re­buke to Repub­li­cans

Los Angeles Times - - BUSINESS - michael.hiltzik@latimes.com Twit­ter: @hiltzikm

The main thread of the Repub­li­can ef­fort to de­stroy the Af­ford­able Care Act may have been snipped apart on the Se­nate floor late last month, but ves­tiges of its cam­paign of van­dal­ism still re­main. On Fri­day, a fed­eral judge in Washington, D.C., kicked away one of its legs in a $52-mil­lion rul­ing in fa­vor of Molina Health­care.

The Long Beach health in­sur­ance com­pany, which spe­cial­izes in Oba­macare cov­er­age, sought the money in ac­cor­dance with the ACA’s risk cor­ri­dor pro­vi­sion. In his sec­ond rul­ing in a row on the is­sue, the fed­eral judge in the case took di­rect aim at what may have been the most cyn­i­cal at­tack on the ACA that con­gres­sional Repub­li­cans cooked up. The judge, Thomas C. Wheeler of the U.S. Court of Fed­eral Claims, had awarded Moda Health of Ore­gon $214 mil­lion just last Fe­bru­ary. His rea­son­ing this time around was al­most iden­ti­cal.

The risk cor­ri­dor pro­gram was one of three sim­i­lar pro­vi­sions de­vised to shel­ter in­sur­ers from un­ex­pected losses in the Af­ford­able Care Act mar­ket­place, es­pe­cially in its for­ma­tive years from 2014 through 2016. To en­cour­age in­sur­ers to en­ter the en­tirely novel mar­ket, the pro­gram aimed to balance risks by tak­ing funds from in­sur­ers that turned out to be un­ex­pect­edly prof­itable and us­ing

the money to cush­ion oth­ers’ losses.

“The in­sur­ers had no ac­tu­ar­ial ex­pe­ri­ence with the new mar­ket,” ex­plains Lawrence S. Sher, Molina’s at­tor­ney in the case. The three-year risk cor­ri­dor pro­gram was de­signed “as an in­duce­ment to get in­sur­ers to par­tic­i­pate.”

Ini­tially, the Con­gres­sional Bud­get Of­fice ex­pected the pro­gram to turn a profit for the gov­ern­ment—that the Depart­ment of Health and Hu­man Ser­vices would col­lect $16 bil­lion over three years from overly prof­itable in­sur­ers but pay out only $8 bil­lion to their money-los­ing coun­ter­parts. But that was sheer con­jec­ture, and the law was writ­ten to al­low HHS to pay out gen­eral gov­ern­ment funds if the pro­gram turned out dif­fer­ently — as it did.

Then con­gres­sional Repub­li­cans threw a wrench into the sys­tem. In 2014, the GOP de­cided to at­tack the risk cor­ri­dor pro­gram as a “bailout” of in­sur­ers, even though the ex­act same pro­vi­sion was part of the GOP’s 2003 Medi­care Part D pre­scrip­tion drug ben­e­fit (and still is). The Repub­li­cans slipped a rider into the 2014 spend­ing bill de­cree­ing that risk cor­ri­dor pay­ments could be made only from risk-cor­ri­dor col­lec­tions, not the gen­eral trea­sury.

The Repub­li­cans were in­or­di­nately proud of their hand­i­work. Sen. Marco Ru­bio (R-Fla.) even used his role in the ma­neu­ver as a talking point in his abortive pres­i­den­tial cam­paign, boast­ing to have “done sig­nif­i­cant dam­age to Oba­macare,” and to have “saved the Amer­i­can tax­payer $2.5 bil­lion.” In light of the beat­ing that Repub­li­can leg­is­la­tors have taken for their ef­forts to re­place the ACA with a se­ries of hor­rific pro­pos­als aimed at steer­ing bil­lions in tax cuts to their rich donors, Ru­bio might want to dis­avow those boasts.

The con­se­quences of the GOP rider were dire. With pay­outs limited to col­lec­tions, HHS was able to pay only 12.6% of all claims for 2014 — $362 mil­lion of the $2.87 bil­lion in claims, and noth­ing for 2015. Sev­eral small in­sur­ers, in­clud­ing co-ops that were ex­pected to serve lower-in­come ex­change cus­tomers, were ef­fec­tively starved out of ex­is­tence. That left roughly a mil­lion co-op mem­bers high and dry, while re­duced com­pe­ti­tion in their re­gions drove up costs for many oth­ers. Repub­li­can crit­ics of the ACA such as House Speaker Paul Ryan (R-Wis.) touted their shut­downs as ev­i­dence of Oba­macare’s fail­ure, without mak­ing much of the fact that they were re­spon­si­ble for the wreck­age.

Molina, for its part, says it re­ceived only $5,913.45 in re­im­burse­ments for both years, against $52.4 mil­lion owed.

Nu­mer­ous le­gal com­men­ta­tors have ob­served that the gov­ern­ment was go­ing to have to cough up the un­paid money one way or an­other. The ACA defines the risk-cor­ri­dor pro­gram as a “must-pay,” without re­gard to where the funds come from. That’s “clearly money-man­dat­ing,” Wheeler ruled.

En­tic­ing in­sur­ers into the mar­ket by promis­ing to cover part of their losses and reneg­ing af­ter the fact is the essence of bait-andswitch. As Nicholas Ba­gley of the Univer­sity of Michi­gan ob­served fol­low­ing the Moda rul­ing, “it was only a mat­ter of time be­fore a court en­tered a money judg­ment against the United States.”

There will be more to come. In­sur­ers al­ready have filed 26 law­suits in the Court of Fed­eral Claims for risk-cor­ri­dor money. Four of these cases al­ready are be­fore the Fed­eral Court of Ap­peals for the Fed­eral Cir­cuit, and the is­sue ap­pears des­tined to reach the Supreme Court. About $19.3 bil­lion is at stake for 2014 and 2015, and an es­ti­mated $3 bil­lion more for 2016, the fi­nal risk-cor­ri­dor year.

So where is the gov­ern­ment sup­posed to find the money to pay? Easy: from its Judg­ment Fund, an open-ended al­lo­ca­tion from which judg­ments awarded by the Court of Fed­eral Claims are paid — that is, “from which the gov­ern­ment’s prom­ises can be ful­filled,” Wheeler wrote. It’s true that Congress has the power to de­cree that the Judg­ment Fund can’t be used to pay risk cor­ri­dor obli­ga­tions, and if Pres­i­dent Trump is as re­solved to al­low the ACA to “im­plode” as he says, he might sup­port such a move.

But with even some Repub­li­cans in Congress talking about find­ing a bi­par­ti­san agree­ment to sta­bi­lize the ACA mar­ket­place, that would be a dis­tinct move back­ward. In any case, Ba­gley wrote in Fe­bru­ary, “re­fus­ing to pay is a shabby way to treat in­sur­ers, which en­tered the ex­changes in re­liance on the fed­eral gov­ern­ment’s prom­ises.”

It’s also true that Wheeler has been the firmest and most con­sis­tent voice from the bench fa­vor­ing the in­sur­ers. Two other judges on the same court have dis­missed sim­i­lar claims in­volv­ing in­sur­ers from Illi­nois and Maine, but those rul­ings al­ready have been ap­pealed.

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