Health Reform WK-EDGE U.S. Supreme Court hears $12 billion ACA argument from insurers
Thursday, December 19, 2019

U.S. Supreme Court hears $12 billion ACA argument from insurers

By Cathleen Calhoun, J.D.

Are health insurers entitled to recoup losses under the Obamacare "risk corridor" provision?

A case that has billions of dollars on the line for certain health insurers was argued before the Supreme Court on Tuesday, December 10, 2019. According to the insurers, payments by the government are overdue and are required as part of the Affordable Care Act (ACA) (P.L 111-148) "risk corridor" provision that allows health insurers to recoup losses in the first three years of health law marketplaces. The case before the court, Maine Community Health Optionsv. U.S., was consolidated with two other cases, Moda Health Plan, Inc. v. United States and Land of Lincoln Mutual Health Insurance Company. The original petition for writ of certiorari was filed February 4, 2019.

Risk corridor. The case challenges the government’s response to Sec. 1342 of the ACA, known as the "risk corridor" provision. Under that section, in the first three years that the exchanges operated, insurers with costs greater than the premiums collected would receive payments from the government to help compensate the losses, and insurers who collected premiums that were greater than their costs had to make payments to the government. However, Congress, through the appropriations process, did not make payments to insurers for the risk corridor program.

Question presented. The insurers asked, "Where the federal government has an unambiguous statutory payment obligation, under a program involving reciprocal commitments by the government and a private company participating in the program, does the presumption against retroactivity apply to the interpretation of an appropriations rider that is claimed to have impliedly repealed the government's obligation?"

Oral arguments. Paul D. Clement, of Kirkland and Ellis LLP, argued on behalf of the insurance companies, and Edwin S. Kneedler, Deputy Solicitor General, Department of Justice, argued on behalf of the United States. The parties spent the majority of their time debating whether a contract existed between the government and the insurance companies and discussing appropriations, since that is often where the Supreme Court’s questions led them.

Clement noted that that the government can obligate itself and Congress can obligate itself without using any magic words of appropriation. Chief Justice Roberts replied by saying " strikes me that you do have the appropriations clause sitting out there and it's a pretty clear yellow light."

The court turned back time and again to the issue of whether or not a contract exists. "Is there some authority that says this isn't a contract? So why does the government not have to pay its contracts, just like anybody else?" Justice Breyer asked. Kneedler replied that the answer is that this is not a contract.

Justice Ginsberg expressed concern about the reliance on an implied damages action, noting that the court has been reluctant to imply any right of action. Justice Ginsberg also focused on the lack of repeal of the words "shall pay." She noted that there was a bill to repeal. "…so, whatever they did, it didn't repeal the obligation, the risk corridors obligation. It stayed there… isn't the fact that they didn't have the votes, they couldn't repeal this measure, significant?" Ginsberg asked. Kneedler answered that he did not think there was any indication that they did not have the votes, and that the bills were simply introduced.

Justice Kavanagh focused on the future implications of the decision. "If we were to rule for you, everyone will be on notice going forward, private parties and Congress itself, that ‘shall pay’ doesn't obligate actual payments…and if we rule against you, Congress also will be on notice going forward that it needs to include ‘subject to appropriations’ kind of language in any mandatory statute," Kavanagh said.

The Court also expressed concern about how the insurance companies may have been lured into the agreement. Chief Justice Roberts asked, "You don't question that these insurance companies would not have participated in the risk corridor program but for the government's promise to pay?" The Chief Justice later added that it was a good business opportunity because "the government promised to pay."

The decision by the court is expected by summer 2020.

5th Circuit. Meanwhile, another Obamacare case decision is expected soon from the 5th Circuit. In December of 2018, a Texas district court accepted the argument that the individual mandate penalty was "essential to" the ACA, rendering the health reform law "untenable" in its absence. Although the court granted the states’ motion for summary judgment regarding the ACA’s constitutionality, leaving the remainder of the ACA invalid, the court denied the states’ request for an injunction (see Federal judge lets ACA fall, saying Congress sawed off its last leg, December 17, 2018). An appeal to the 5th Circuit followed, and arguments were heard in July 2019. The 5th Circuit decision is expected soon, it will likely go to the Supreme Court as well.

Attorneys. Paul D. Clement (Kirkland and Ellis LLP). Edwin S. Kneedler, Department of Justice.

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