Stephanie Armour reports in the Wall Street Journal that a decision should come down soon from the U.S. Court of Appeals for the Federal Circuit in two of the risk corridor lawsuits against the federal government filed by health insurers seeking reimbursement for losses in the ACA marketplace. Those suits seek a total of about $12.3 billion in risk corridor payments the government failed to make in 2014, 2015 and 2016. In fact, the bill could be considerably higher if insurers prevail. That's what I'd like to spotlight, below.
The risk corridors, to review briefly, were one of three risk management programs the ACA established to cushion health insurers' plunge into an unprecedented market structure. Insurers with losses above a fixed threshold would get a large chunk of them reimbursed by the federal government, while those with profits above a mirror-image threshold would pay a chunk of those gains in. The ACA statute states that insurer losses will be paid according to this formula, and HHS guidance through 2013 affirmed this. In early 2014, though, with the program under attack from Marco Rubio and other Republicans, HHS and CMS indicated that reimbursements would be revenue neutral, and reduced if the contributions from profitable insurers did not cover unprofitable insurers' losses. Republicans then, in omnibus funding bills for FY 2015 and 2016, banned the agency from using its funding streams to pay any shortfall beyond insurers' contributions. In October 2015, CMS announced that it would pay just 12.6% of $2.87 billion in insurers' compensable 2014 losses. A cascade of failures among the nonprofit insurance co-ops established (and underfunded) by the ACA followed. How many of those co-ops would have survived had the risk corridor promises been kept is debatable. By 2016, the last year of the program, unpaid risk corridor losses totaled $12.3 billion.
The insurers have a clear case on the merits, regardless of what the courts decide about the paradox of funds promised by statute by unappropriated by Congress (one of several such paradoxes generated by serial Republican sabotage of the ACA, all of them eroding the full faith and credit of the U.S. government). One aspect of the complaint highlighting the extent of the moral debt, and possibly the financial one, caught my eye in the class action complaint joined by some 150 insurers, Health Republic Insurance Company v. The United States of America.
