Paul Clement (Photo: Diego M. Radzinschi/ALM) Paul Clement (Photo: Diego M. Radzinschi/ALM)

The U.S. Department of Justice (DOJ) told the U.S. Supreme Court Wednesday that health insurers are to entitled to collect $12.3 billion in Affordable Care Act (ACA) risk corridors program payments.

Congress voided any obligation for the federal government to make those payments when it expressly prohibited the U.S. Department of Health and Human Services (HHS) from using certain funds to make the payments, DOJ said in a new brief

The judges on the U.S. Court of Appeals for the Federal Circuit ruled 9-2 in support of the federal government’s position in 2018.

(Related: Two Judges Blast USA in Risk Corridors Appeal Dissents)

DOJ is asking the Supreme Court to uphold the appeals court decision, and to reject challenges from providers claiming that the U.S. government is still on the hook for the risk corridors program payments.

The ACA Risk Corridors Program

When Congress was developing the ACA, it created a new public exchange system, or family of online marketplaces, that consumers could use to shop for health coverage on an apples-to-apples basis and use federal premium tax credit subsidies to pay for the coverage.

The ACA drafters added the risk corridors program to persuade insurers to sell coverage through the exchange system, by protecting them against the risk of unexpected losses.

The ACA public exchange system came to life in October 2013, with the first coverage solid taking effect Jan. 1, 2014.

The risk corridors program was supposed to operate from 2014 through 2016. The program was designed to use cash from thriving exchange plan issuers to reimburse struggling plans.

Revenue from thriving issuers was much lower than demand for payments from struggling issuers, and Republicans in Congress put provisions in budget bills that required HHS to use only risk corridors program revenue to make the risk corridors program payments to issuers.

Carriers filed many suits seeking money damages with the Washington-based U.S. Court of Federal Claims. The suits generated a substantial amount of uncertainty, as judges at the court divided over whether the government had broken its risk corridors program promises.

Moda Health’s Position

“Like numerous other insurers, petitioners responded exactly as Congress intended, participating in the exchanges and charging lower premiums than they would have absent the government’s commitment to share some of the risk,” lawyers for Oregon-based Moda Health Plan Inc. said in a petition filed in February with the Supreme Court.

Moda is represented by Kirkland & Ellis, including partner Paul Clement, who was identified as counsel of record. Moda’s lawyers argued that “the net effect was a bait-and-switch of staggering dimensions in which the government has paid insurers $12 billion less than what was promised.”

Moda’s attorneys argued that the Federal Circuit decision, left untouched, “provides a roadmap for the government to promise boldly, renege obscurely, and avoid both financial and political accountability for depriving private parties of billions in reliance interests.”

Clement added, “That the decision emanates from the court with exclusive jurisdiction over financial claims against the government only underscores the need for this court’s review. There is no prospect of further percolation; there is only the certainty of further damage.”

The Blues’ Position

Lawyers from the law firm O’Melveny & Myers filed an amicus brief on behalf of Blue Cross Blue Shield Association, which advocates for the interests of 36 locally operated companies that provide insurance for about 106 million people.

“Blue Plans were disproportionately injured by the government’s bait-and-switch. Of the $12.3 billion in risk corridors obligations that the government has failed to pay, 40% — or nearly $5 billion — is owed to Blue Plans,” O’Melveny partner K. Lee Blalack II wrote in the friend-of-the-court brief.

DOJ Position Details

Moda’s and Blue Cross’ “repeated invocations of a multibillion-dollar ‘bait-and-switch’ ring hollow,” DOJ said Wednesday. “The [Affordable Care Act] itself provided no funding for risk-corridors payments, leaving that determination to the judgment of future Congresses.”

HHS “had no authority to make payments, or to commit the government to making such payments, beyond the sums (if any) Congress ultimately appropriated,” DOJ argued.

DOJ said it would’ve been unreasonable to expect any insurer to participate in the ACA exchanges based on the assumption that certain costs would be reimbursed, given that the ACA itself did not provide funding for those subsidies and that “future Congresses might elect never to provide full or any funding.”

“It is more probable that insurers like petitioners elected to sell plans on the exchanges as a result of the powerful business incentives they had to do so,” DOJ said.

Resources

Links to the ACA risk corridors program litigation briefs, including the new DOJ brief, are available here.

— Read Judge, Ruling Against Feds, Won’t Freeze Health Insurer’s ACA Suiton ThinkAdvisor.

— Connect with ThinkAdvisor Life/Health on LinkedIn and Twitter.