On April 27, 2020, the U.S. Supreme Court ruled in Maine Community Health Options v. United States that health insurance companies that lost money on policies offered on the health benefit exchanges created by the Affordable Care Act (ACA) were entitled to recoup those losses from the government.
Background
Congress created “risk corridors” as part of the ACA to help health insurance companies balance the risk of offering plans to previously uninsured Americans since insurers would have difficulty predicting the cost of health care for these new participants. Section 1342 of the ACA addressed this problem by allowing insurers to share both profits and losses with the federal government during the first three years the exchanges were in operation. If premium costs exceeded the cost of providing coverage, insurance companies would have to share the surplus with the federal government; if the cost of providing coverage exceeded premium costs, the insurance companies would receive compensation from the government for their losses.
However, in 2014, Congress cut back on available funding to reimburse insurance companies for losses — even though in the first year of the health benefit exchanges, the government owed insurers more than $2.8 billion.
The Decision
Four insurance companies sued the government in federal court to recover compensation for their losses on the health exchanges. While agreeing with the insurers that Section 1342 of the ACA obligates the government to make the risk corridor payments, the court ruled that the 2014 appropriations bill passed by Congress “repealed or suspended” those payments. The insurers appealed to the Supreme Court, which consolidated the four cases into Maine Community.
In an 8-1 decision, the Supreme Court reversed the federal court’s ruling, finding that the Section 1342 requirement for reimbursement was valid even if Congress did not set aside specific funding for that purpose.
In addition, the Court found that the obligation remained in effect even considering the 2014 appropriations bill riders that prohibited the use of funds for risk corridor payments. The Court noted that the riders were not a direct repeal of the government’s obligation, which must remain in effect until Congress impliedly repeals it. The bar for implied repeals is high; Congress’ intent must be “clear and manifest” to impliedly repeal a statute, and the 2014 appropriations bill riders do not clear that bar.
Finally, the Court found that the insurance companies’ reliance on the Tucker Act to sue in the Court of Federal Claims was proper. This federal law allows certain claims for money from the government. The insurers’ claim for compensation relief falls within the Tucker Act’s waiver of sovereign immunity for the government since the claim is based on a statute that can be fairly interpreted as requiring compensation from the government.
The Supreme Court’s decision requires the government to pay all amounts owed under the risk corridors program — a total of more than $12 billion.
The team of benefit attorneys at Hall Benefits Law helps clients manage legislative and regulatory changes to employer health insurance plans, including handling changes to plan documents and advising on how to implement corresponding procedures. To learn more or to get help making changes to your plans today, call 678-439-6236.
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