Supreme Court Backs Insurers Over $12 Billion in Obamacare ‘Risk Corridor’ Payments

By | April 27, 2020

The U.S. Supreme Court on Monday ruled in favor of health insurers seeking $12 billion from the federal government under a program set up by the Obamacare law aimed at encouraging them to offer medical coverage to previously uninsured Americans.

The 8-1 ruling authored by liberal Justice Sonia Sotomayor paves the way for a significant one-time cash infusion for major companies such as Humana Inc., Anthem Inc. and Centene Corp. The justices reversed a lower court’s ruling that Congress had suspended the government’s obligation to make such payments.

The court agreed with insurers that said that the lower court ruling, if allowed to stand, would have let the government pull a “bait-and-switch” and withhold money the companies were promised.

“The government should honor its obligations,” Sotomayor wrote.

Conservative Justice Samuel Alito was the sole dissenter, saying the court’s ruling “has the effect of providing a massive bailout for insurance companies that took a calculated risk and lost.”

Help to Recover

Moda Health Plan Inc. and other insurers that sued to try to compel the U.S. Department of Health and Human Services (HHS) to make the payments have said the government was supposed to help them recover from early losses they suffered after the 2010 passage of the Affordable Care Act (ACA) under Democratic former President Barack Obama.

The law, dubbed Obamacare, has enabled millions of Americans who previously had no medical coverage to obtain insurance, including those with pre-existing medical conditions.

Unlike other court cases involving Obamacare, this dispute concerned only payments to insurers and did not directly challenge the law itself.

Other insurers involved in the case included Blue Cross and Blue Shield of North Carolina, Maine Community Health Options and Land of Lincoln Mutual Health Insurance Company.

Payments would have come through the law’s so-called risk corridor program designed to mitigate insurers’ risks from 2014 to 2016, when they sold coverage to previously uninsured people through exchanges established under Obamacare.

Insurers that paid out significantly less in claims on policies sold through the exchanges than they took in from premiums provided some of their gains to the government. Insurers that paid out more were entitled to government compensation for part of their losses.

Republicans, who have opposed Obamacare from the outset and numerous times sought to repeal it in Congress, have – like Alito – called the risk-corridor program a “bailout” for the insurance industry.

From 2015 through 2017, Congress passed legislation barring HHS from using general funds to pay the government’s risk corridor obligations.

Health insurers turned to federal courts to obtain the payments. The U.S. Court of Appeals for the Federal Circuit ruled in 2018 that Congress effectively repealed its obligation to pay the insurers, prompting the insurers to appeal to the Supreme Court.

The opinion is Maine Community Health Options v. United States.

(Reporting by Lawrence Hurley; Additional reporting by Nate Raymond; Editing by Will Dunham)

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