Insurers have reason for cautious optimism after Supreme Court hears risk corridors case

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Crystal Yednak Senior Manager, Health Research Institute, PwC US December 13, 2019

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US Supreme Court justices appeared to air doubts about the Department of Justice’s (DOJ) argument that the federal government did not have to pay more than $12 billion in Affordable Care Act (ACA) risk corridor payments to health insurers, according to news coverage of oral arguments in the case this week.

“You pay in, we pay out if we feel like it. What kind of a statute is that,” Justice Elena Kagan asked Edwin Kneedler, who represented the DOJ before the court, according to an account in SCOTUSblog. Justice Brett Kavanaugh asked why the ACA did not explicitly state that risk corridor payments would be subject to appropriations if that was the intent, according to the same account.

Justice Ruth Bader Ginsburg questioned why bills erasing the government’s obligation to make the risk corridor payments had failed if that was what Congress had wanted all along. Justice Stephen Breyer asked, according to Reuters, “Why doesn’t the government have to pay its contracts just like everybody else?”

The risk corridor program was etched into the ACA to entice insurers to offer individual and small-group plans on the exchanges in the exchanges’ first few years. Insurers were promised in the ACA that if they wound up with losses beyond a certain limit, they would receive money from the government. Conversely, if insurers wound up too profitable, they would have to make payments.

Congress never appropriated money to cover the risk corridor payments, and profitable insurers’ payments fell short of the money needed to pay the unprofitable ones. Those missed payments have been blamed by some insurers that went out of business in the first few years of the ACA. The government argues that the ACA did not appropriate funds for the payments. For their part, the insurers view the situation as a “$12 billion bait-and-switch” that “undermines political accountability by allowing the government to promise boldly and renege obscurely,” the plaintiffs wrote in their Supreme Court brief.

HRI impact analysis

The Association for Community Affiliated Plans, which represents insurers, argued in its brief that these plans did not have other business to cushion the loss and that the move devastated community-based plans as they received “pennies on the dollar that the ACA’s text promised them.” Other groups, including the US Chamber of Commerce, argued that the government’s decision not to pay brought into question whether businesses could trust the federal government to keep its promises.

This is not the only ACA-related front on which the administration is arguing that it shouldn’t have to pay because the money was not appropriated by Congress. In October, a US Court of Federal Claims judge ordered the federal government to pay dozens of insurers nearly $1.6 billion for cost-sharing reduction payments the Trump administration halted in October 2017. The administration had argued that it did not have to make the payments because Congress had never appropriated money for cost-sharing reduction payments, nor did it include a funding mechanism for them in the ACA.

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Trine K. Tsouderos

HRI Regulatory Center Leader, PwC US

Tel: +1 (312) 241 3824

Ben Comer

Senior Manager, Health Research Institute, PwC US

Crystal Yednak

Senior Manager, Health Research Institute, PwC US

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