Supreme Court Rules Federal Government Must Pay $12B to ACA Insurers

April 28, 2020 - In an 8-1 decision, the Supreme Court has ruled that the federal government must pay $12 billion to insurers enrolled in the Affordable Care Act’s risk corridor program.

The risk corridor program was a temporary framework that intended to compensate insurers for unexpectedly unprofitable plans during the marketplaces’ first three years (2014-2016).

The initiative established a system for calculating payments under the program: Plans with profits above a certain threshold would pay the government, while plans with losses below that threshold would receive payments from the government. Specifically, the program stated that the eligible profitable plans “shall pay” the Secretary of the Department of Health and Human Services, while the Secretary “shall pay” the eligible unprofitable plans.

“These cases are about whether petitioners—insurers who claim losses under the Risk Corridors program—have a right to payment under §1342 and a damages remedy for the unpaid amounts. We hold that they do,” Justice Sonia Sotomayor stated in the court's opinion.

"We conclude that §1342 of the Affordable Care Act established a money-mandating obligation, that Congress did not repeal this obligation, and that petitioners may sue the Government for damages in the Court of Federal Claims.”

The Court of Federal Claims held that Congress’ appropriations riders impliedly repealed or suspended the government’s obligation to pay eligible plans.

While the panel acknowledged that repeals by implication are generally disfavored, it found that the riders in these cases adequately expressed Congress’s intent to suspend the government’s payments to plans beyond the sum of payments it collected from profitable plans.

“These cases present three questions: First, did §1342 of the Affordable Care Act obligate the Government to pay participating insurers the full amount calculated by that statute? Second, did the obligation survive Congress’ appropriations riders? And third, may petitioners sue the Government under the Tucker Act to recover on that obligation? Because our answer to each is yes, we reverse,” said Justice Sotomayor.

"These holdings reflect a principle as old as the Nation itself: The Government should honor its obligations.”

In a dissenting opinion, Justice Samuel Alito argued that the ruling would essentially provide a bailout for the health insurance industry.

"Under the court’s decision, billions of taxpayer dollars will be turned over to insurance companies that bet unsuccessfully on the success of the program in question. This money will have to be paid even though Congress has pointedly declined to appropriate money for that purpose, " Justice Alito wrote.

Others view the decision as a win for health insurers. Matt Eyles, president and CEO of America’s Health Insurance Plans (AHIP) issued a statement supporting the Supreme Court’s decision.

“Millions of Americans rely on the individual and small group markets for their coverage and care, and they deserve a steady market that provides them with affordable choices. Health insurance providers are focused on delivering for them, and they depend on the federal government to be a fair and reliable business partner committed to the same goal,” Eyles said.

The ruling will benefit insurers who suffered losses as a result of the program, Eyles added.

“The federal government made a clear commitment in the interest of building stable markets and making coverage more affordable for individuals and small employers. Health insurance providers kept their commitments while incurring substantial losses,” he said.

“Today’s decision, as the Supreme Court observes, reflects ‘a principle as old as the Nation itself: The Government should honor its obligations.’ We appreciate that today’s Supreme Court 8-1 decision ensures that the federal government honors the obligations it made for services the private sector already delivered.”