A federal appeals court ruled the federal government does not have to make risk corridor payments, dealing a blow to insurers that claim they are owed billions in payments under the Affordable Care Act.
In a closely watched case brought by Moda Health Plans, the three-judge panel for the United States Court of Appeals for the Federal Circuit reversed a decision by the Court of Federal Claims, ruling that the Department of Health and Human Services is not obligated to make risk corridor payments to insurers under the ACA.
The payments were built into the ACA as a way to protect insurers from extreme gains or losses on the ACA exchanges in a market that was still untested by insurers.
“Although section 1342 obligated the government to pay participants in the exchanges the full amount indicated by the formula for risk corridor payments, we hold that Congress suspended the government’s obligation in each year of the program through clear intent manifested in appropriations riders,” wrote Chief Judge Sharon Proust in the decision (PDF). “We also hold that the circumstances of this legislation and subsequent regulation did not create a contract promising the full amount of risk corridors payments.”
The court acknowledged the section of the ACA requiring the HHS Secretary to establish risk corridor payments is “unambiguously mandatory,” but said Congress included appropriations riders during each of the program’s three years to ensure risk corridor payments were budget neutral.
The court added that the program “lacks the trappings of contractual agreement,” rebuffing Moda Health’s argument that HHS is required to make payments.
In a statement to FierceHealthcare, Moda Health President and CEO Robert Gootee said the insurer plans to appeal the decision.
“We are disappointed by today’s decision,” he said. “If it is upheld on appeal, it will effectively allow the federal government to walk away from its obligation to provide partial reimbursement for the financial losses Moda incurred when we stepped up to provide coverage to more than 100,000 Oregonians under the ACA. We continue to believe, as our trial court did, that the government’s obligation to us is clearly stated in the law and we will continue to pursue our claim on appeal.”
In a dissenting opinion, Judge Pauline Neman argued that the appropriations riders did not cancel out HHS’s obligation to make risk corridor payments. She said the court’s decision “undermines the reliability of dealings with the government.”
So this isn’t the end of the road for insurers, and there’s some good language in the majority opinion about their statutory entitlement. But it’s a Michigan-size pothole in their path to getting paid.
Dozens of insurers have sued the government to reclaim billions in unpaid risk corridor payments. Moda Health claimed it is owed $214 million, while Blue Cross Blue Shield of North Carolina filed for nearly $150 million in unpaid payments and Humana claims its owed $611 million.