by Phil Galewitz, Kaiser Health News | Dec 9,
2019 12:23pm
More
than $12 billion is at stake for the nation’s health insurers Tuesday when the
Supreme Court hears another Affordable Care Act case.
For the
federal government, the potential damages could be far greater, as its
reputation as a reliable partner to private businesses is on the line.
Unlike
earlier Obamacare cases before the high court—where the entire 2010 law and
health coverage for millions of Americans was at risk—the latest case has
largely flown under consumers’ radar.
The
case revolves around a temporary Obamacare provision—called the “risk-corridor”
program—that was designed to help health plans recover some losses in the first
three years of the health law marketplaces.
The
Republican-controlled Congress in late 2014 stripped most of the money out of
the program in a budget bill signed by President Barack Obama. This occurred a
year after insurers began selling policies to millions of Americans with the
expectation that the safeguard would back them up.
Republicans
led by Sen. Marco Rubio, R-Fla., who were determined to repeal the ACA, called
the original provision an insurer “slush fund.” But researchers later found
that the loss of the risk-corridor program was largely responsible for soaring premiums in 2016 and 2017,
and contributed to several startup insurers going out of business.
Dozens
of insurers have cried foul and sued the government. Lower courts were split on
whether the government should be forced to make the payments.
Here
are five reasons you should pay attention to the case:
The integrity of the federal government is at stake.
Health
insurers say the government’s decision on the risk-corridor program amounts to
a bait-and-switch. The health plans took a chance with the new marketplaces, where
they had little knowledge of how sick or expensive new enrollees would be. They
said they expected the risk-corridor funding would back them up.
The
latest data shows the government owes insurers more than $12 billion in
payments to cover losses on the insurance exchanges between 2014 and 2016.
“This
case warrants comparison to Lucy Van Pelt pulling the football away from
Charlie Brown—with our nation’s government cast as the capricious bully,” the
Association for Community Affiliated Plans, an industry group representing
nonprofit health plans, wrote in an amicus brief to
the Supreme Court. “If the Federal Circuit’s rule stands, then from now on no
business can trust a statutory promise of payment from the government.”
The
risk-corridor program was one of several ACA safeguards for
insurers. The law called for insurers that made large profits to pay some of it
back to the government to share with money-losing plans.
But the
money taken in under the program fell billions short of the amount owed to
insurers. The Obama administration told insurers that it would make up the
difference with funds from the Centers for Medicare & Medicaid Services’
budget. The General Accountability Office, the investigative arm of
Congress, supported that decision for
2014.
The
Trump administration argued the federal government never had power under the
law to make the payments out of the CMS budget. The December 2014 budget deal
confirmed that, according to the administration.
The
federal government’s top lawyer rejects insurers’ notion that the risk-corridor
money was ever guaranteed to them.
Congress
did not “lure private parties into expensive undertakings with clear promises,
only to renege after private parties have relied to their detriment and
incurred actual losses,” Solicitor General Noel Francisco argued in court
briefs.
Obamacare consumers may benefit if the court sides with the
insurers.
The
Supreme Court case combined suits from four insurers: Moda Health Plan of
Oregon, Maine Community Health Options, Blue Cross Blue Shield of North
Carolina and Land of Lincoln Mutual Health Insurance, a now-defunct health plan
from Illinois. But dozens of other insurers also have filed lawsuits. If the
court rules in favor of insurers, it could force the federal government to pay
them $12 billion.
Experts
say that could have a marginal effect on those insurers in setting future
premiums. It could also force some plans to make rebate payments to customers
based on another ACA provision that plans pay money back to members if they
spend more than 20% of their premium dollars on administration, marketing and
profits.
Meg
Murray, CEO of the Association for Community Affiliated Plans, said the
government owes $627 million to about 20 of her organization’s plans. “The
money would help them going forward in paying back debts or investing their
plans or reducing premiums,” she said.
The co-ops have been stymied.
When
the Affordable Care Act was nearing its final votes, Democrats removed a controversial
provision that would have set up a government-operated plan that would be a
“public option” for consumers. It was replaced with federal money
to start new, nonprofit insurers to bring more competition into many markets,
which lawmakers hoped would help hold down premium costs. There were 23 new
health cooperatives that started enrolling members in 2014. Today, just four
are still in business.
More
than other insurers, the co-ops were most at risk when the money was eliminated
because they operated on the smallest budgets.
“This
was a huge factor in the failure of the co-ops,” said Timothy Jost, a retired
law professor at Washington and Lee University in Lexington, Va., who has
studied the ACA.
Kevin
Lewis, CEO of Maine Community Health Options, said his company is owed $59
million. Without that money, his plan had to withdraw from New Hampshire and
raise premiums in areas it still serves. Community Health Options is one of
three health plans on the marketplace in Maine and has 38,000 members.
Lewis
said that, while many factors caused the demise of the co-ops, the loss of
risk-corridor money is high among them.
The U.S. Chamber of Commerce—a leading opponent of Obamacare—is
defending the risk-corridor provision.
The
chamber has spent nearly a decade and millions of dollars fighting to overturn
the Affordable Care Act. That’s why its amicus brief supporting
insurers’ fight to restore its risk-corridor funding is so notable.
In its
brief, the chamber said the health law promised funding to private insurers,
and when the government reversed its commitment, “it pulled the rug out from
under them.”
The
court’s ruling would reverberate well beyond just the health insurance industry
if it does not reverse lower court rulings, according to the chamber.
“If
allowed to stand, the decision will chill the business community from working
with the federal government in the future,” the chamber said.
A ruling could influence another big Obamacare case.
If the
justices rule in favor of the insurers on this case, they may strengthen the
industry’s argument in a separate ACA lawsuit working its way through lower
courts.
Insurers
have sued the federal government for $2.3 billion in unpaid “cost-sharing
reduction” payments after the Trump administration stopped making the payments
in 2017. Six insurers—in front of three different federal judges—have succeeded in their challenges over
unpaid payments.
These
ACA payments were intended to compensate insurers for reducing deductibles,
copayments and coinsurance mandated by the ACA for marketplace enrollees with
low incomes.
Some
lawsuits from insurers have been stayed, pending the court’s ruling on risk
corridors.
Kaiser Health News is
a nonprofit news service covering health issues. It is an editorially
independent program of the Kaiser Family Foundation, which is not affiliated
with Kaiser Permanente.
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