Pension & Benefits News Supreme Court will hear arguments on risk corridors program payments, lack of funds
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Friday, July 12, 2019

Supreme Court will hear arguments on risk corridors program payments, lack of funds

By Pension and Benefits Editorial Staff

The U.S. Supreme Court has granted petitions to determine the validity of the suspension of risk corridors program payments to insurers of qualified health plans (QHP) under the Patient Protection and Affordable Care Act (ACA) if Congress failed to appropriate funding for the programs. In consolidating three separate appeals from the Federal Circuit involving the ACA’s risk corridors program, the Supreme Court will address whether Congress’ failure to include appropriations for the programs absolved the federal government’s liability from making these payments.

Risk corridors. Section 1342 of the ACA created the temporary risk corridor program to provide issuers with protection against uncertainty resulting, in part, from the prohibition against denial of enrollment to individuals based upon preexisting conditions by limiting issuers’ losses and gains for calendar years 2014 through 2016. Section1342(b)(1) of the ACA, requires the HHS to make payments to QHPs that suffer losses above a set amount, while §1342(b)(2) requires QHPs experiencing gains above a set amount to make payments to the Secretary.

In Moda Health Plan, Inc. v. U.S., the Federal Circuit reversed the opinion of the Court of Federal Claims by concluding that an insurer of a qualified health plan failed to state a claim for additional payments under the risk corridors program under either a statutory or contractual theory. Although the Federal Circuit agreed that §1342 of the ACA mandated that the government make full risk corridor payments according to the statutory formula, the appellate court concluded that riders on subsequent appropriations bills clearly indicated Congress’ intent to prevent the use of taxpayer funds to support the risk corridors program. The insurer’s qualified health plan’s risk corridor payments were thus suspended for the timeframe in question.

The Federal Circuit also rejected a challenge in Land of Lincoln Mutual Health Insurance Co. v. U.S., affirming the Court of Federal Claims decision finding that an insurer’s QHP taking claims failed because no statutory obligation to pay money, even when unchallenged, created a property interest under the Fifth Amendment. Lincoln filed a complaint asserting a statutory, regulatory, and contractual entitlement to the outstanding 2014 and 2015 payments, totaling $72,859,053. The court concluded that HHS was not obligated to pay the entirety of risk corridor payments owed to QHPs on an annual basis. The court deferred to HHS’ interpretation of §1342 finding that the agency’s decision to administer the risk corridors program in a budget neutral manner over the three-year life of the program, rather than annually, was reasonable in light of ambiguity and the lack of an appropriation for the program.

In a nonprecedential order, the Federal Circuit also denied the insurer’s appeal in Maine Community Health Options v. U.S., based on the lower court’s conclusion that Congress had timely barred the use of appropriated funds to pay any amounts due under the risk corridors program. The lower court declined to consider the government’s alternative argument that the provisions requiring risk corridors payments could be construed to make the government a guarantor of deficiencies in collections under the risk corridors program.

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