Supreme Court Rules Insurers Are Entitled to Payments Under ACA’s Risk Corridors Program

Reversing the decision of the U.S. Court of Appeals, Federal Circuit, the U.S. Supreme Court has ruled that health insurers are entitled to full payment under the risk corridors program established by the Affordable Care Act (ACA). As background, the federally administered risk corridors program was intended to mitigate the effects of inaccurate rate setting (due to inadequate data about the expanded insured population) in qualified health plans in the first three years of the ACA Exchanges (2014–2016) by limiting insurers’ losses and gains based on claims experience. When the government failed to make payments under the program, several insurers brought cases before the Court of Federal Claims, with mixed results (see our Checkpoint article). Subsequently, the U.S. Court of Appeals, Federal Circuit agreed with the insurers that the ACA’s plain language obligated the government to make full risk corridor payments; however, it held that appropriations legislation, first enacted for the 2015 fiscal year and repeated for 2016 and 2017, suspended that obligation by prohibiting the federal agency overseeing the program from using appropriated funds for risk corridor payments to insurers (see our Checkpoint article).

The Supreme Court has now held, in consolidated cases, that the ACA obligated the government to pay insurers the full amount set forth in the risk corridors program; that Congress did not repeal the obligation when it limited funding for the program; and that the insurers may sue the government for damages in the Court of Federal Claims. The Court explained that the plain terms of the ACA’s risk corridors provision—notably, language providing that the government “shall pay” program amounts due—created an obligation that was neither contingent on—nor limited by—the availability of appropriations or other funds. Furthermore, noting that repeals by implication are not favored and a rarity, the court held that Congress did not repeal the obligation through restrictions in the appropriations legislation. Confirming that the insurers properly sued in the Court of Federal Claims because, among other things, their claims “seek specific sums already calculated, past due, and designed to compensate for completed labors,” the Court returned their cases to that court so the insurers could continue to pursue their claims.

EBIA Comment: As this case illustrates, unresolved ACA issues persist in the courts. Given that more than $12 billion dollars in risk corridor payments for 2014–2016 are at stake, this ruling is a substantial win for insurers. For more information, see EBIA’s Health Care Reform manual at Sections XIV.A (“Introduction and Understanding Small and Large Group Markets”) and XX.D (“Risk Corridors”).

Contributing Editors: EBIA Staff.