Court Says Feds Don’t Owe ACA Funds To Health Insurers

In a case with billions of dollars at stake, a federal appeals court ruled that the federal government doesn't have to pay health insurers money they say they are owed under the Affordable Care Act.

A three-judge panel rejected claims from two health insurers that the government was required to pay up from a program meant to protect insurers who attracted customers who were sicker and more expensive than anticipated.

The two insurers were seeking hundreds of millions of dollars in payments from the ACA's risk corridor program. At least three dozen insurers have filed similar lawsuits. Health insurance carriers say they are owed about $12 billion from the risk corridor program. Insurers claim the government's failure to make these payments resulted in skyrocketing premiums and dwindling competition in the ACA marketplaces.

The court sided with the Trump administration in ruling that federal government didn’t have to make the payments because Congress had taken action — after the ACA's passage — requiring the program to be budget neutral year after year.

The temporary risk corridor program was one of three ACA programs offering financial protection to insurers in the health insurance when they opened in 2014. Insurers earning more than expected were required to pay into the program, while those losing big were expected to receive payments during the three years it operated.

However, the marketplaces performed worse than expected in the first few years, meaning more insurers sought payments. During the program’s first year, there were only enough funds to make good on 12.6 percent of payments owed to insurers.

The insurers said the federal government was required to use taxpayer dollars to make up the funding shortfall. Republicans decried the request as a bailout. In annual spending bills, Congress banned the federal government from making payments to insurers, prompting them to file lawsuits to recover the payments.

Many insurers in the ACA's early years raised premiums higher than expected to make up for the funding shortage. Many nonprofit health insurers that were launched with ACA funding shut down, unable to absorb the financial blow from the lost risk corridor payments.

But the legal defeat is unlikely to have much of an effect on the marketplaces going forward, experts say. That's because companies have made adjustments in their premiums to accommodate the funding shortfall. In addition, many insurers who remained in the marketplace are now making money on their ACA customers.