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US District Court Denies Appeal to Resolve Risk Corridor Payments

The Federal District Court of Appeals denied a request from several payers to collect over $12 billion in risk corridor payments.

The Federal District Court of denies risk corridor payments.

Source: Thinkstock

By Thomas Beaton

- Federal judges for the US Federal District Court of Appeals denied a request to reopen a case that could provide over $12 billion in risk corridor payments to payers.

Moda Health Plan, BlueCross BlueShield of North Carolina, and Land of Lincoln Mutual Insurance asked the court to reopen a hearing that determined healthcare payers in the risk corridor program are primarily responsible for program costs.

Chief Judge Sharon Prost, with Judges Pauline Newman and Evan Wallach, ultimately denied the appeal, stating that insurers are required to absorb risk corridor costs without help from federal funds.

The health plans argued that Congress set a statutory obligation to compensate private payers in the risk corridor program in order to bolster insurance markets in the Affordable Care Act’s early years. The payers maintain that risk corridor payments are federally mandated and the program retroactively set a precedent to compensate payers.

“The facts are simple; the principle large. The critical question concerns the methods by which the government deals with non-governmental entities that carry out legislated programs,” the plaintiffs said.

“Here, in order to persuade the nation’s health insurance industry to provide insurance to previously uninsured or uninsurable persons, and thus to take insurance risks of unknown dimension, the Affordable Care Act provided that insurance losses over a designated percentage would be reimbursed, and comparable profits would be turned over to the government—the risk corridors program.”

Moda Health Plan and the other payers also argue that the government’s decision to freeze risk corridor payments was not a specific appropriation related to the risk corridor program.

Amici curae in support of the plaintiffs added that a failure by the government to pay the risk corridor program, and other private-government partnered insurance programs, inhibits the ability to form future private-public healthcare partnerships.  

“Qualified health plan issuers, like Moda, entered the health care exchanges and set premiums with the belief that they would receive risk corridors payments, and Congress, subsequently, passed the relevant appropriations riders,” the amici said.

“To hold that the Government can abrogate its obligation to pay through appropriations riders, after it has induced reliance on its promise to pay, severely undermines the Government’s credibility as a reliable business partner. For example, the ACA also ‘clearly and unambiguously imposes an obligation on HHS to make payments to health insurers that have implemented cost-sharing reductions on their covered plans.’”

Prost explained that the court believed Congress has the ultimate authority to determine how funds are appropriated in federal-private programs, including the risk corridor program.

Moda Health Plan filed claims to their risk corridor payments in June of 2018 and has garnered support from other payers, industry organizations, and healthcare experts. Independent stakeholders argue that the government’s decision to freeze the payments will make it harder for private insurers and the federal government to address rising insurance costs.

If the plaintiffs decide to pursue the case further, they may require a hearing from the Supreme Court.

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