Court: U.S. must pay insurers $12 billion

WASHINGTON — The Supreme Court ruled Monday that insurance companies can collect $12 billion from the federal government to cover their losses in the early years of the health care law championed by President Barack Obama.

Insurers are entitled to the money under a provision of the Patient Protection and Affordable Care Act that promised the companies a financial cushion for losses they might incur by selling coverage to people in the marketplaces created by the health care law, the justices said by an 8-1 vote.

The program only lasted three years, but Congress inserted a provision in the Health and Human Services Department’s spending bills from 2015 to 2017 to limit payments under the “risk corridors” program.

Both the Obama and Trump administrations had argued that the provision means the government has no obligation to pay.

But Justice Sonia Sotomayor said in her opinion for the court that the congressional action was not sufficient to repeal the government’s commitment to pay. “These holdings reflect a principle as old as the Nation itself: The Government should honor its obligations,” Sotomayor wrote.

Justice Samuel Alito Jr. was the lone dissenter, saying the court should not provide a “bailout” for the companies that decided to participate in the health care law’s “risk corridor” program, which has since ended.

The case had marked the Supreme Court’s fifth look at Obama’s signature domestic success. Unlike others it did not challenge the law’s underpinnings.

The question instead was whether Congress had encouraged insurance companies into offering the kinds of policies that were instrumental to making the health care law work, and then

reneged on a pledge to share the cost.

For three years starting in 2014, the law said that if insurers had higher-than-expected costs, the government would reimburse a portion. Conversely, the companies had to pay into the fund any unexpected savings.

Expenses overwhelmed savings. For instance, insurers paid $362 million into the fund the first year, but others claimed reimbursable expenses of $2.87 billion.

The companies, which sold insurance in Alaska, Illinois, Maine, North Carolina, Oregon and Washington, cite Health and Human Services statistics to claim they are owed $12 billion.

But congressional Republicans mandated that the payments to insurance companies had to come from the savings, so as to be revenue-neutral. They prohibited the Department of Health and Human Services from using any other resources for the payments, and both the Obama and Trump administrations had defended that decision.

But it seemed clear at oral arguments in December that the justices disagreed.

Justice Stephen Breyer said he was reminded of law school. “Day one of ‘contracts,’” he told the government’s lawyer. “So why does the government not have to pay its contracts, just like anybody else?”

In her opinion, Sotomayor said Congress “created a rare money-mandating obligation requiring the federal government to make payments.” It cannot escape the promise simply by not appropriating enough money to cover the commitment, she said.

The companies “may seek to collect payment through a damages action in the Court of Federal Claims,” she wrote.

Alito disagreed that federal law provided an avenue for the companies to seek damages.

Instead, he wrote, the decision has the effect of “providing a massive bailout for insurance companies that took a calculated risk and lost. These companies chose to participate in an Affordable Care Act program that they thought would be profitable.”

The decision involved several cases, including Maine Community Health Options v. United States.

The case is separate from a challenge to the health care law that the court has agreed to hear in its term that begins in October.

Information for this article was contributed by Mark Sherman of The Associated Press and by Robert Barnes of The Washington Post.

“Day one of ‘contracts.’ So why does the government not have to pay its contracts, just like anybody else?” — Justice Stephen Breyer