Health Reform WK-EDGE Plain language of ACA requires Congress to make full risk corridor payments
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Friday, May 1, 2020

Plain language of ACA requires Congress to make full risk corridor payments

By Patricia K. Ruiz, J.D.

Supreme Court rules Congress must make full risk corridors payments to insurers.

Congress must make the payments it promised to insurers under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) risk corridor program, the Supreme Court held. In an 8-1 decision, the court found that the risk corridors statute created a government obligation to pay insurers the full amount regardless of whether Congress expressly provided budget authority before appropriating funds (Maine Community Health Options v. U.S., April 24, 2020, Sotomayor, S.).

The ACA created the risk corridors program to limit the profits and losses of health insurers during the first three years of the health insurance exchanges. Section 1342 of the ACA set forth a formula to compute a plan’s gains or losses at the end of each year. However, the ACA did not appropriate funds for the yearly payments, nor did it limit the amounts the government might pay. The ACA did not require the program to be budget neutral. After the three years, the government owed more to unprofitable insurers than profitable insurers owed to the government, resulting in a deficit of more than $12 billion. Four health insurance companies sued the federal government for damages, alleging that section 1342 required the government to pay the full amount of their losses.

The Supreme Court held that the risk corridors statute created a government obligation to pay insurers the full amount set forth by section 1342, as the government can incur an obligation directly through statutory language. Additionally, section 1342 imposed a legal duty of the United States that could mature into a legal liability through the insurers’ participation in the health insurance exchanges. The court held that the ACA must be given its plain meaning—that the government "shall pay" the sum required by section 1342. Despite the government’s arguments, neither the Appropriations Clause nor the Anti-Deficiency Act addresses whether Congress can create or incur an obligation directly by statute. The language of section 1342 does not predicate the risk corridor payments on whether Congress expressly provided budget authority before appropriating funds. Additionally, section 1342 contains no language limiting the obligation to the availability of appropriations. Further, the Supreme Court held that Congress did not impliedly repeal the obligation through its appropriations riders.

The Supreme Court also held that Congress did not impliedly repeal its obligations under the risk corridor program through its appropriations riders and that the insurers properly sued for damages in the Court of Federal Claims.

The case is No. 18-1023.

Attorneys: Stephen John McBrady (Crowell & Moring LLP) for Maine Community Health Options. Noel J. Francisco, U. S. Department of Justice, for the United States.

Companies: Maine Community Health Options

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