The federal government does not have to pay health insurers money they claimed they are owed under an Obamacare program, a federal appeals court ruled Thursday.
In a 2-1 ruling, the panel of judges sided with the Trump administration and rejected claims from two insurers who were seeking hundreds of millions of dollars in Obamacare “risk corridor” payments designed to protect insurers from unexpectedly large losses in the first years of the new law.
Under the program, which expired at the end of 2016, insurers with lower-than-expected costs would pay into the system while insurers facing higher-than-expected medical claims would be able to recoup some of their losses. But as the Obamacare marketplaces struggled, relatively few insurers paid into the program while more sought payments. In its first year, the risk corridor program had only enough funds to deliver 12.6 percent of payments owed to insurers, Politico’s Paul Demko notes.
The insurers said the federal government was still on the hook for the payments and should tap other funds to cover the shortfall. Congressional Republicans called that an illegal bailout and moved to block such payments in appropriations riders for fiscal 2015 and 2016, prompting the insurers to file suit charging that the government had breached an implied contract.
The court didn’t buy that argument. “Congress clearly indicated its intent here,” it ruled Thursday. “It asked [the Government Accountability Office] what funding would be available to make risk corridors payments, and it cut off the sole source of funding identified beyond payments in. It did so in each of the three years of the program’s existence.”
The insurers can still appeal the ruling to the full appellate court or petition the Supreme Court to consider the case.
Why it matters: At least three dozen other insurers have filed similar lawsuits, according to Politico. “In all, insurers say they’re owed more than $12 billion from the risk corridor program, a shortfall they have partially blamed for skyrocketing premiums and dwindling competition in the Affordable Care Act marketplaces,” Demko writes. At the same time, many of the insurance companies still participating in the federal exchanges are making money, and the legal ruling “shouldn’t affect the market going forward,” said Larry Levitt of the Kaiser Family Foundation.