The U.S. Supreme Court has ruled the federal government is obligated to pay health insurers $12 billion for enrolling in the Affordable Care Act’s “risk corridor” program in reversing a lower court’s decision.
The program placed limits both on profits and losses for insurers who offered plans via the online exchanges created by the act, more commonly known as “Obamacare,” by funneling some profits to the Department of Health and Human Services, Fox News reported.
That money was to be used by HHS to pay out to insurers who were not earning profits by being enrolled in Obamacare. The end result is that the federal government owed insurers more than $12 billion than was actually brought in, the network added.
“We conclude that §1342 of the Affordable Care Act established a money-mandating obligation, that Congress did not repeal this obligation, and that petitioners may sue the Government for damages in the Court of Federal Claims,” Justice Sonia Sotomayor wrote for the court’s majority.
The high court struck down a federal appeals court that ruled Congress had “repealed or suspended” the government’s payment obligation through appropriations riders on bills.
However, the Supreme Court said that according to precedent, “repeals by implication are not favored,” thus, since Congress did not specifically repeal the obligation to pay insurers, the federal government remains obligated under the original terms of the program.
Justice Samuel Alito was the sole dissenter. The constitutional originalist argued separately that there isn’t any basis for any cause of action on the part of the government.
But the majority held that under the Tucker Act, the government waives traditional immunity based on “the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort.
Fox News added:
Alito argued that ObamaCare’s provision that the government “shall pay” for insurance companies’ losses is not enough to create a cause of action under the Tucker Act. He claimed that allowing the companies to sue has significant repercussions and allows private insurers to collect money to which they should not be entitled.
“Today,” he wrote, “the Court infers a private right of action that has the effect of providing a massive bailout for insurance companies that took a calculated risk and lost.”
According to the Centers for Medicare & Medicaid Services, which issued a final rule regarding the risk corridors in March 2012, “The overall goal of these programs is to provide certainty and protect against adverse selection in the market while stabilizing premiums in the individual and small group markets as market reforms and Exchange begin in 2014.”
Under Section 1341 of the Affordable Care Act, the law provided that “a transitional reinsurance program must be established in each State to help stabilize premiums for coverage in the individual market from 2014 through 2016.
“All health insurance issuers and third party administrators on behalf of self-insured group health plans, must make contributions to support reinsurance payments that cover high-cost individuals in non-grandfathered plans in the individual market,” the rule noted.
Those sympathetic to insurers noted back in 2018 that the government’s failure to pay them the billions they are owed under the risk corridor program would cause “collateral damage,” according to the Wharton School at the University of Pennsylvania.
“The government’s refusal to pay insurers their dues under the risk corridor program – totaling $12.3 billion – is causing collateral damage as well. It undermines the confidence insurers could have on its promises, raises premiums and therefore federal subsidies, and distorts risk pools, say experts at Wharton and elsewhere,” the school noted in an analysis.
The Supreme Court agreed.
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