Ron Shinkman Dec. 9, 2019
The U.S.
Supreme Court will hear oral arguments Tuesday on a lawsuit involving the
Affordable Care Act's risk corridor program that could have implications for
the future of public-private partnerships in healthcare and beyond.
The case centers
on some $12 billion in payments dozens of health insurers say they are
owed due to losses on the state health insurance exchanges. The payments were
initially scotched by CMS when the agency declared risk corridors would be
revenue neutral. They were then zeroed out by Congress.
Observers say
the money and where it ends up will not be the ultimate thrust of the high
court's decision — it's whether or not the business sector will have trust in
the federal government in current and future partnerships.
Legal experts
have been puzzling as to why the high court decided to take on the appeals of
four regional health insurers duking it out with HHS in lower courts regarding
reimbursement they say is owed under the ACA's now dead risk corridors program.
Risk corridors
were designed to keep insurers from irrationally pricing premiums during the
first years of the state health insurance exchanges when it was unknown what
the market for such plans would be. Under the terms of the program, plans in
the exchanges with claims that were 97% or below that of its projections made
payments to plans whose claims were 103% or higher than what they had
projected.
Initially, the
federal government said any plan that needed the risk corridor payments would
receive them. But in 2014, CMS, which oversaw the program, said it would be
budget neutral — as opposed to the agency making appropriations from its
general funds to make risk corridor payments. The following year, HHS said that
based on the budget neutral formula it could only pay about one-eighth of what
was owed, or slightly more than $240 million of $3 billion claims in total.
Congress also passed an appropriations rider blocking CMS from dispersing
general funds to insurers. That essentially killed the program.
"The
primary impact of the shortfall was really felt by the insurers who
participated in the early years of the marketplace — it was particularly
devastating for co-ops and other smaller insurers who expected these funds to
come in and didn't have an alternative when they didn't," Katie Keith, a
legal scholar and a faculty member at Georgetown University's Center for Health
Insurance Reforms, told Healthcare Dive.
About a third
of the non-profit co-op health insurance plans went out of business partly as a
result of losing the risk corridor payments, although the larger insurers were
able to soldier on by raising premiums. But these days competition in the
exchanges is expanding rather than shrinking, Keith said.
Timothy Jost,
professor emeritus at Washington & Lee law school who has written
extensively about the legal wrangling, is puzzled over the high court's
decision to take on the case. Still, he said the rationale is very
straightforward.
"Four
members of the court thought there was an important legal question that needed
to be answered," he told Healthcare Dive, referring to the number of
justices required to grant a hearing on cases involving agreements between the
federal government and private entities.
Keith said the
court may be amenable to some changes in the outcome of the litigation
involving the four health plans: Moda Health, Maine Community Health Options,
Land of Lincoln Mutual Insurance Co. and Blue Cross Blue Shield of North
Carolina.
The plans sued
first in the Federal Court of Claims and then the Federal Court of Appeals, and
then appealed to Supreme Court after they mostly lost their cases. However,
dozens of more health plans have sued over the risk corridor issues. Should
those four insurers entirely prevail at the high court, the feds could wind up
owing them and other payers as much as $12.3 billion in risk corridor payments.
Jost doesn't
think such an outcome is likely. He believes the court is more interested in
determining whether a public-private partnership program could be disabled by
Congress through the appropriations process, or even a federal agency on a
regulatory whim.
"The court
could decide that Congress could change funding rules in the middle of all
sorts of programs," he said. "It will be kind of an important
indicator of the health of public-private partnerships not only involving the
ACA, but Medicare Advantage, agriculture, defense and many other areas."
However, should
the court rule fully in favor of the insurers and order CMS to cough up the
risk corridor payments, Keith believes consumers could actually benefit from
the insurers' windfall.
"The
impact would vary by state and insurer, but consumers could receive higher
rebates through medical loss ratio refunds, or insurers could lower premiums.
There would be a number of operational questions," she said.
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