The US Supreme Court ruled in favor of health insurers seeking $12 billion from the federal government under the risk corridors program set up by the Affordable Care Act (ACA).
The US Supreme Court ruled today that health insurers that took on the risk of covering millions of previously uninsured Americans must be paid the $12 billion they are owed under a program set up under the Affordable Care Act (ACA).
In an 8 to 1 ruling, the justices reversed a lower court decision that supported Congress' suspension of full payments due for 2014 to 2016, during the early years of enrollment on the exchanges. The ruling will mean a significant one-time cash infusion from the government to companies like Humana Inc. and Centene Corp.
Conservative Justice Samuel Alito was the only dissenter, arguing the court’s decision amounts to a bailout for insurance companies.
The payment will cover insurers’ losses sustained in the early years of the ACA, which President Barack Obama signed in 2010. Insurers had argued that if the lower court ruling stood, it would let the government continue to withhold money promised under language in the ACA that amounted to a contract.
Before the exchanges began covering millions of uninsured Americans on January 1, 2014, insurers had to be enticed to enter a market that would include consumers who had lacked insurance for years, if they had ever had it at all. The early years of the ACA brought a spike of claims among some groups, as chronic conditions were finally diagnosed and patients received long-delayed surgeries.
To offset these losses, the ACA promised payments through "risk corridors," which would protect the insurers from heavy losses and hold down premiums. The statute, “set a formula for calculating payments under the program: If an insurance plan loses a certain amount of money, the Federal Government ‘shall pay’ the plan; if the plan makes a certain amount of money, the plan ‘shall pay’ the Government,” according to the court’s opinion, issued by Justice Sonia Sotomayor.
“Health insurance providers kept their commitments while incurring substantial losses. Today’s decision, as the Supreme Court observes, reflects ‘a principle as old as the Nation itself: The Government should honor its obligations,” said Matt Eyles, president and CEO of America’s Health Insurance Plans (AHIP), quoting Sotomayor's opinion.
While the program was scheduled to last for 3 years, Congress passed a provision modifying HHS’s spending bills from 2015 to 2017, limiting payments under the program. This happened after Democrats lost control of the Congress in November 2014, and Republicans prevented HHS from using any funds outside the risk corridor program to make insurers whole. Former Acting CMS Adminstrator Andy Slavitt tweeted that the ruling shows that the Republicans' actions to harm the ACA were wrong from the start.
BREAKING: The Supreme Court just ruled that @MarcoRubio & Congress were wrong to prohibit the Obama Admin from paying risk corridors to reduce premiums in the ACA in the early years.
Congress did anyway, causing insurers to leave & raise rates. This should never have happened.
— Andy Slavitt @ 🏡 (@ASlavitt) April 27, 2020
As a result of Congress' actions, many community-based insurance funds went bankrupt and commercial insurers raised premiums or left markets to account for the monies not paid under the program.
“Today’s Supreme Court decision will help inject much-needed stability in the market, at an especially uncertain time. The added support will help our plans better maintain affordable premiums and continue to focus on improving the health of the communities they serve,” said Ceci Connoly, president and CEO of the Alliance of Community Health Plans (ACHP), in a statement.
Sotomayor emphasized the importance of holding a government accountable to its obligations. “Alexander Hamilton stressed this insight as a cornerstone of fiscal policy. ‘States,’ he wrote, ‘who observe their engagements . . . are respected and trusted: while the reverse is the fate of those . . . who pursue an opposite conduct’… Centuries later, this Court’s case law still concurs.”