An Oregon-based insurer scored a $214 million court victory this week in a case brought after congressional Republicans in 2014 hobbled the federal government’s ability to fund an Affordable Care Act program.
The program, known as risk corridors payments, sought to blunt some of the risk insurers were taking on in the first three years of Obamacare’s implementation. The program shifted money from insurers that over-performed on expectations to those that underperformed. However, GOP lawmakers inserted an amendment in must-pass legislation barring the government from drawing funding for the program from elsewhere in the Department of Health and Human Services to make up any shortfalls between the money collected from insurers and the money owed. (Florida’s GOP Sen. Marco Rubio, pictured above, led the charge against the risk corridors program.)
As a result, insurers, on average, have received around 12 percent of the payments they have been owed.
A U.S. Court of Claims ruled Thursday that the feds had “breached the contract by failing to make full risk corridors payments as promised,” and handed over to the Oregon insurance company Moda the $214 million summary judgement:
There is no genuine dispute that the Government is liable to Moda. Whether under statute or contract, the Court finds that the Government made a promise in the risk corridors program that it has yet to fulfill. Today, the Court directs the Government to fulfill that promise. After all, “to say to [Moda], ‘The joke is on you. You shouldn’t have trusted us,’ is hardly worthy of our great government.” Brandt v. Hickel, 427 F.2d 53, 57 (9th Cir. 1970).
In effect an attack against the ACA Republicans launched under President Obama is now a mess that President Trump’s administration will need to clean up.
“We are reviewing the decision and have no further comment,” the Justice Department told TPM when asked for a response to the ruling. The HHS’ Centers for Medicare and Medicaid Services, which is responsible for implementing the risk corridors program, declined to comment.
There are a few other percolating lawsuits brought by insurers against the U.S. government for the shortfalls in the payments. According to University of Michigan Law School professor Nicholas Bagley, the major question isn’t whether courts will side with insurers (he believes they will), it is how lawmakers will move forward in making the payments as the insurer victories pile up in court. Bagley estimated that government could ultimately be on the hook for as much as $15 billion in total.
“Refusing to pay is a shabby way to treat insurers, which entered the exchanges in reliance on the federal government’s promises,” Bagley wrote at the blog, Incidental Economist. “Our president, however, has a track record of stiffing business partners. I wouldn’t be surprised if he signed a law doing just that.”
