Bloomberg Law
April 27, 2020, 2:09 PMUpdated: April 27, 2020, 9:06 PM

Insurers Win $12 Billion Fight Over Obamacare Payments (2)

Mary Anne Pazanowski
Mary Anne Pazanowski
Legal Reporter

The U.S. Supreme Court on Monday said the federal government will have to pay health insurers about $12 billion under an Obamacare program to make up for losses they incurred by offering coverage to sicker, uninsured people.

The Affordable Care Act’s “risk corridor” section obligated the government to pay these insurers in exchange for selling plans at affordable premiums to a group of people who previously would have been denied coverage or charged more, the opinion by Justice Sonia Sotomayor said.

The decision ends long-standing litigation and vindicates the rights of insurers who started selling plans on ACA exchanges before it was clear how much they would have to pay providers to care for their members. Many of the companies failed when the government refused to fully compensate them for their losses, reducing competition in the health insurance marketplace.

The insurers’ suits originally were viewed as “long shots,” so it’s interesting that the high court ruled 8-1 in their favor, Katie Keith told Bloomberg Law. Keith is a health policy expert who teaches courses on the ACA at Georgetown University Law Center.

The high court also put to rest concerns about whether the government can back out of promises made to private entities, Keith said. That decision has implications well beyond the health policy world, Michael S. Kolber, a partner at Manatt, Phelps & Phillips LLP in New York, agreed.

Companies that do business with the federal government can now rest assured that once Congress supplies financial incentives in return for their performance, they will get paid unless Congress explicitly repeals that promise, he said. Kolber was formerly the lead legal adviser to the Department of Health and Human Services on several of the ACA’s key features.

Duty to Pay Imposed by Law

The case involved a “very straightforward question” over whether the government made and must keep a promise to pay insurers in exchange for their decision to take a chance on a new business, Mark Rust, of Barnes & Thornburg in Chicago, told Bloomberg Law. Rust represented Land of Lincoln Mutual Health Insurance Co., one of the four insurers that took the case to the Supreme Court.

The court answered that question in the affirmative. The ACA’s risk corridor provision expressly says the government “shall pay,” the court said. That language imposed a legal duty on the United States to reimburse unprofitable insures for their risk corridor losses, even though Congress didn’t specifically appropriate the money to pay it, it said.

Moreover, the provision doesn’t require the risk corridors program to be budget neutral or suggest that payments to unprofitable insurers depended on profitable plans’ payments to the government, the court said. There also was no suggestion in the law that the government’s obligation could be satisfied by partial payments, it said.

Rust wasn’t surprised by the ruling. The government had a “clear unambiguous obligation” under the law, he said. Land of Lincoln did everything it was supposed to do, but was forced out of business because it couldn’t collect the money from the government and, due to restrictions on ACA Consumer Operated and Oriented Plans, couldn’t get the money through investors or business loans.

The decision will benefit Illinois, which paid off Land of Lincoln’s obligations after the company failed, Rust said. It could get the money within six weeks, and no later than six months, he said.

No Implied Repeal

Congress didn’t impliedly repeal the provision through appropriations riders limiting the funds that could be used to pay the insurers, the court also said. Repeals by implication aren’t favored, and Congress’s “mere omission” of an appropriation, by itself, didn’t discharge the government’s obligation, it said.

Kolber told Bloomberg Law he was surprised the Federal Circuit found an implied repeal in the first place. The appropriation rider limited the funds from which the Health and Human Services Department could pay insurers, but it didn’t eliminate the obligation, he said.

Chief Justice John G. Roberts Jr. and Justices Ruth Bader Ginsburg, Stephen G. Breyer, Elena Kagan, and Brett M. Kavanaugh joined the opinion.

Justices Clarence Thomas and Neil M. Gorsuch joined as to all but one section in which Sotomayor said the court wasn’t persuaded that two pieces of legislative history presented clear evidence of Congress’s intent to cancel the risk corridors obligation.

Private Right of Action Questioned

Justice Samuel A. Alito Jr. dissented. He disagreed with the majority’s conclusion that the Tucker Act provided the insurers with a cause of action to recover the risk corridor payments as damages.

The Tucker Act doesn’t create a private right of action, but it allows people to sue the federal government for damages growing out of the breach of an express or implied contract where a law mandates that the federal government compensate the plaintiff for its damages.

The majority held the insurers properly sued under this law because the risk corridor provision’s “shall pay” language implied their right of action. By obligating the government to pay the insurers, the provision is a money-mandating law that creates both a right and a remedy, the majority said.

Alito took issue with that interpretation. Though the court has said that litigant has a right of action to collect damages from the U.S. under any law that “can fairly be interpreted as mandating compensation,” it has never inferred such a right from “shall pay” language, he said.

The consequences of the majority’s decision, moreover, could be enormous, as many laws include the words, “shall pay,” he said.

Effect on Other ACA Suits

The case involved a very narrow question and probably can’t be taken as a prediction on how the high court will rule on the other ACA cases on its agenda, including cases over the birth control mandate and the constitutionality of the law itself, Keith said.

But it’s likely to affect the ACA cost-sharing cases, which involve a similar provision that said the government “shall pay” insurers for reducing deductibles, copays, and coinsurance for low-income people.

The insurers have long been thought to have a stronger case insofar as these payments are concerned, because there has been no repeal of the cost-sharing obligation, Kolber said.

But the risk corridor program ended, and the amount of money insurers can claim is set, Keith noted. The cost-saving program is ongoing, and the Tucker Act usually isn’t used in cases where the damages aren’t set, Keith said.

It may be a “slam dunk” for insurers seeking cost-sharing payments for past years, Keith said. But there also is a question about whether they can recover future payments, and that question is complicated by “silver loading,” a process in which the insurers adjusted premiums to make up for the losses, she said.Pa

Paul D. Clement, of Kirkland & Ellis LLP, Washington, argued for the insurers. U.S. Deputy Solicitor General Edwin S. Kneedler argued for the government.

The case is Maine Cmty. Health Options v. United States, U.S., No. 18-1023, 4/27/20.

(Updated throughout with comments.)

To contact the reporter on this story: Mary Anne Pazanowski in Washington at

To contact the editors responsible for this story: Rob Tricchinelli at; Nicholas Datlowe at