SUPREME COURT RULES THAT HEALTH INSURERS ARE ENTITLED TO RISK CORRIDORS PAYMENTS UNDER THE AFFORDABLE CARE ACT

On April 27, 2020, the Supreme Court ruled that the language of the Affordable Care Act (ACA) required the government to make Risk Corridors Payments to health insurers who lost money on policies sold on the Health Benefit Exchanges (the Exchanges) despite Congress’ passing appropriation bill riders prohibiting these payments.  

As stated by Justice Sotomayor’s majority opinion, Congress passed the ACA “seeking to improve national health insurance markets and extend coverage to millions of people without adequate (or any) health insurance.” To that end, the ACA established the Exchanges on which individuals could buy health insurance. There was, however, some business risk for insurers seeking to sell policies on the Exchanges due to the lack of reliable data on the individuals likely to buy these policies. To address this issue and to encourage insurers to sell on the Exchanges, the ACA established Risk Corridors payments limiting losses for insurers that participated on the Exchanges. During the first three years of its implementation, §1342 of the ACA provided that the Secretary of Health and Human Services “shall establish and administer” the Risk Corridors program and “shall pay” insurers for losses exceeding the statutory thresholds. 

Despite this mandatory language, in all three of the years that the Risk Corridors program was in effect, Congress passed riders to appropriations bills stating that “[n]one of the funds made available by this Act…may be used for payments under section 1342(b)(1)….” For the entire three years of the program, there was a deficit of $12 billion owed to health insurers losing money on the Exchanges. 

The United States Court of Appeals for the Federal Circuit ruled that the Government was not required to make the Risk Corridors payments, finding that the appropriations riders had impliedly repealed or suspended these payments. In an 8-1 ruling, the Supreme Court reversed. In reaching its decision, the Court addressed three questions:

First, did §1342 of the Affordable Care Act obligate the Government to pay participating insurers the full amount calculated by that statute? Second, did the obligation survive Congress’ appropriations riders? And, third, may petitioners sue the Government under the Tucker Act to recover on that obligation? 

The Court answered all three questions in the affirmative. First, the Court found that the use of the word “shall” in requiring HHS to establish the program and make the payments obligated the Government to make the payments. Second, citing Supreme Court precedent that “repeals by implication are not favored,” the Court found that neither of the documents relied on by the Federal Circuit showed a “’clear intent’ to cancel or ‘suspend’ the Government’s Risk Corridors obligation.” Third, the Court found that the Tucker Act, which allows certain claims against the Government to be brought in the Court of Federal Claims, applied because “[t]he Risk Corridors statute is fairly interpreted as mandating compensation for damages, and neither exception to the Tucker Act applies.” 

As a result of this decision, health insurance companies will reportedly recover $12 billion from the Government. 

The case is Maine Community Health Options v. United States. The opinion is linked here.