U.S. Court of Appeals for the Federal Circuit (Photo: Michael A. Scarcella)

Two judges on the full U.S. Court of Appeals for the Federal Circuit have blasted the United States of America for failing to make $12.3 billion in Affordable Care Act risk corridors program payments to health insurers, and their colleagues for failing to agree to review the insurers' claims.

The full court declined, in a 9-2 ruling, to take up a group of four appeals filed in connection with health insurers' efforts to collect ACA risk corridors program subsidy payments from the U.S. Department of Health and Human Services (HHS).

The court lists the case on its website as Moda Health Plan Inc. v. U.S. (Case Number 17-1994).

In June, a three-judge panel at the appeals court rejected insurers' efforts to collect the ACA risk corridors program payments, by a 2-1 vote. The insurers asked all of the judges at the Federal Circuit appeals court to rehear the matter “en banc.”

Nine of the judges at the court rejected the insurers' request for a rehearing without comment. Circuit Judge Pauline Newman, who was appointed to the court by President Ronald Reagan, and Circuit Judge Evan Wallach, who was appointed by President Barack Obama, both supported rehearing the matter, and each has written a dissent.

Newman writes in her dissent that the federal government made a statutory commitment to compensate the health insurers for their losses, then failed to provide the funds to make the payments.

“The insurers, who had performed their part of the bargain, were denied the promised compensation,” Newman writes. “My colleagues now ratify that denial. This is a question of the integrity of government… Our system of public-private partnership depends on trust in the government as a fair partner.”

Newman cites a portion of a brief filed on behalf of the health insurers by a trade group, America's Health Insurance Plans (AHIP).

The appeals court's 2-1 ruling against the health insurers “'now makes it a risky business to rely upon the government's assurances,'” according to the passage in the AHIP brief quoted by Newman. “'That deals a crippling blow to health insurance providers' business relationships with the government.'”

Wallach writes in his dissent that he believes the insurers have a case because Congress has never repealed the U.S. government's risk corridors program payment obligations in a clear way.

“This case raises an exceptionally important issue regarding the government's reliability as an honest broker,” Wallach writes. “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.”

Earlier court rulings

One lower-court judge, at the U.S. Court of Federal Claims, ruled in favor of one health insurer seeking risk corridors program payments, Moda Health Plan Inc., in February 2017.

U.S. Court of Federal Claims judges ruled against three other health insurers — Land of Lincoln Mutual Health Insurance Company, Blue Cross and Blue Shield of North Carolina and Maine Community Health Options — in three other, separate cases.

ACA risk corridors program primer

President Barack Obama signed the two bills that created the ACA statutory package in March 2010. One ACA provision called for HHS to start a subsidy program, the ACA risk corridors program, to encourage health insurers to participate in another new ACA program, the ACA public exchange program. ACA drafters intended for the public exchange plan program to be a web-based supermarket for health insurance.

The risk corridors program was supposed to use cash from thriving ACA exchange plan issuers to help struggling exchange plan issuers.

Later, provisions added to appropriations measures blocked HHS from using any revenue source other than cash from the thriving exchange plan issuers to fund the risk corridors program.

Republicans in Congress argued that the risk corridors program was a bailout fund for private insurers, and that the federal government should not be protecting insurers' earnings.

Soon after the first exchange plan coverage sold took effect, in January 2014, most of the issuers reported that they were losing money. Risk corridors program managers were able to collect only 15 percent of the amount of cash that the program owed the struggling insurers for 2014.

Risk corridors program managers have made none of the payments owed for 2015 and 2016.

Resources

A copy of the Federal Circuit appeals court's order, and the Newman and Wallach dissents, is available here.

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What's next for ACA risk corridor payments

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