High court seems skeptical of reasons for not making risk-corridor payments
U.S. SUPREME COURT JUSTICES came down hard on the federal government last week in a case over whether insurers should collect 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 the 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 Kagan said Congress “induced” payers to participate in the ACA exchanges when it created the risk-corridor program. It was “a good business opportunity for (insurers) because the government promised to pay,” Chief Justice John Roberts added.
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 protect 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 Congress gave the HHS secretary instructions on which funds the agency could use to pay risk-corridor payments. But the provision didn’t mean HHS was obligated to pay 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.”
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intended to overturn the government’s obligation to pay insurers when it didn’t appropriate the funds since it never repealed the ACA’s risk-corridor provision. Congress knows how to write a law that is conditional on appropriations and it never said that the risk-corridor payments were conditional, Kagan and Justice Brett Kavanaugh 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
“So why does the government not have to pay its contracts, just like anybody else? They didn’t say they wouldn’t pay … end of the case.”
Justice Stephen Breyer
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 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, adding that they didn’t get them for merely issuing the policies; it was an insurance program, not a subsidy.
If insurers win, they could get a large windfall. But individuals enrolled in their health plans aren’t likely to benefit much through lower premiums or rebates under the ACA’s medical loss ratio rules, experts said. Because of the timing of a decision, any cash that 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.
Another 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.”