Health Insurance Exchanges: A $12B Judgment

The U.S. Supreme Court has determined that the federal government must pay over $12 billion to certain health insurers that participated in health insurance exchanges in the first three years that those exchanges were in effect. In Maine Community Health Options v. United States, the court ruled that health insurers that suffered financial losses beyond the corridors established under the Affordable Care Act’s Risk Corridors Program are entitled to recover for those losses.

The ACA created the temporary Risk Corridors Program as part of an effort to stabilize health insurance premiums, incentivize insurers to participate in the exchanges, and mitigate financial risks borne by insurers for offering new products to new populations, including those with preexisting conditions. The Program applied from 2014-2016 and provided that health insurers that achieved a certain level of financial success under the program would pay some of their profits into the program, which would be used to make payments out to others that did not fare as well. In each of the three years in which it operated, the Program ran at a substantial deficit, and Congress refused to appropriate funds to make up the shortfall. As a result, insurers that stayed in the exchanges raised their premiums substantially. Other insurers left the exchanges, with some filing for bankruptcy. The lawsuits ensued. 

The Supreme Court found that:

• In enacting the Risk Corridors Program, Congress created a statutory obligation on the government to pay insurers for the losses that were to be recoverable under the Program.
• In failing to appropriate funds to pay insurers, Congress did not repeal its obligation to make those payments.
• The insurers had the right to bring private lawsuits against the federal government in this instance, a finding challenged by Justice Samuel Alito in his lone dissent.

The case has now been remanded for further proceedings consistent with the Supreme Court’s ruling. Although the ruling presents a victory for insurers, questions remain about when payments will be made, where within the federal government the funds will come from, how insurers will share in the recovery, and how any recovery by insurers may be applied.

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