WASHINGTON — The Supreme Court agreed on Monday to decide whether the federal government was entitled to break a promise to shield insurance companies from some of the risks they took in participating in the exchanges established by President Barack Obama’s health care law, the Affordable Care Act.
In their brief seeking Supreme Court review, two insurance companies said they had been the victims of “a bait-and-switch of staggering dimensions in which the government has paid insurers $12 billion less than what was promised.”
The health care law established so-called risk corridors meant to help insurance companies cope with the risks they took when they decided to participate in the law’s marketplaces without knowing who would sign up for coverage. Under the program, the federal government would limit insurance companies’ gains and losses on insurance sold in the marketplaces from 2014 through 2016.
If premiums exceeded a company’s medical expenses, the insurer would be required to pay some of its profit to the government. But if premiums fell short of medical expenses, the insurer would be entitled to payments from the government.
The law’s drafters hoped that payments into the program would offset payments out. As it turned out, losses substantially outpaced gains. Under the terms of the law, the government was required to make up much of the difference.
But Congress later enacted a series of appropriation riders that seemed to bar the promised payments. The insurance companies sued, but a divided three-judge panel of the United States Court of Appeals for the Federal Circuit ruled against them.
Chief Judge Sharon Prost, writing for the majority, acknowledged that the health care law “obligated the government to pay the full amount of risk corridors payments.” But she added that “the riders on the relevant appropriations effected a suspension of that obligation for each of the relevant years.”
In dissent, Judge Pauline Newman said the majority had undermined basic principles of fairness.
“The government’s ability to benefit from participation of private enterprise depends on the government’s reputation as a fair partner,” she wrote. “By holding that the government can avoid its obligations after they have been incurred, by declining to appropriate funds to pay the bill and by dismissing the availability of judicial recourse, this court undermines the reliability of dealings with the government.”
In urging the Supreme Court to hear the case, two insurance companies said the appeals court’s decision threatened to encourage the government to walk away from other inconvenient promises.
“By giving judicial approval to the government’s egregious disregard for its unambiguous statutory and contractual commitments,” the brief said, “the decision provides a road map for the government to promise boldly, renege obscurely, and avoid both financial and political accountability for depriving private parties of billions in reliance interests.”
The court agreed to hear three cases on the issue: Maine Community Health Options v. United States, No. 18-1023; Moda Health Plan Inc. v. United States, No. 18-1028; and Land of Lincoln Mutual Health Insurance Co. v. United States, No. 18-1038. The three cases will be consolidated for a single hour of arguments and heard in the court’s next term, which will begin in October.
