The Supreme Court on Monday agreed to hear an appeal from health insurance companies who say the federal government owes them $12 billion from losses sustained under the Affordable Care Act.
The cases involve one of the Affordable Care Act’s three risk mitigation programs that were designed to shield insurers from losses, giving them a greater incentive to participate when the individual exchanges opened in 2014.
Under the risk corridor program, which was designed to last only three years, insurers whose premiums exceeded consumers’ claims paid into the fund, while their peers who didn’t charge enough high enough rates could draw from it.
However, insurers had a tough time setting premiums since they didn’t know how sick their new customers would be. Too many miscalculated in the early years, racking up billions in losses.
Republicans, championed by Florida Sen. Marco Rubio, succeeded in requiring the program to be budget neutral after insurers had already set their 2014 rates. So insurers only received a fraction of the risk corridor payments they requested because the amount far exceeded what was contributed. That huge shortfall forced some smaller insurers to shut their doors and prompted some others to stop offering coverage on the exchanges.
Insurers sued the Department of Health and Human Services, saying they were owed more than $12 billion in payments. Lower court rulings were mixed, and last June, a federal appeals court ruled against two carriers, according to Katie Keith, who is on the research faculty at Georgetown’s Center on Health Insurance Reforms.
In February, four insurers – Moda Health Plan, Blue Cross and Blue Shield of North Carolina, Land of Lincoln and Maine Community Health Options – petitioned the Supreme Court to hear their appeal. Other groups, including the US Chamber of Commerce, the National Association of Insurance Commissioners and attorneys general in mainly blue states, have filed amici briefs in support of the insurers.
The case will be heard in the 2019-20 term.