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High Court’s $12 Billion Obamacare Case Goes Beyond Health Care

Dec. 9, 2019, 10:25 AM

Health insurers who lost money selling plans on Obamacare exchanges to people who otherwise wouldn’t have qualified for coverage will try to convince the U.S. Supreme Court Dec. 10 that the government owes them over $12 billion.

It’s an odd case, but the Supreme Court’s decision still will be consequential because it involves questions that go beyond health care, Michael S. Kolber, a partner at Manatt, Phelps & Phillips LLP in New York, told Bloomberg Law. Kolber was formerly the lead legal adviser to the Department of Health and Human Services on several key features of the Affordable Care Act.

The program at issue ended in 2016, and the outcome will have little impact on insurers’ future participation in ACA exchanges, Kolber said.

But there are “big picture” questions concerning whether Congress impliedly repealed a statutory promise to pay, and if so, whether the government can be counted on to keep its promises in the future, Katie Keith told Bloomberg Law. Keith is a health policy expert who teaches courses on the ACA at Georgetown University Law Center.

There’s also big money involved, and the outcome likely will affect cases involving Obamacare’s cost-sharing payment program, Kolber said. The provision that created that program uses the same language as the risk corridor provision, and every decision so far has said the text created an obligation for the government to pay the insurers, Keith said. The Federal Circuit will hear arguments in those cases in January.

‘Shall Pay’

The ACA prohibited insurers from denying coverage or charging higher premiums to people with pre-existing conditions, and set up exchanges for individuals to purchase health insurance.

Section 1342 set up a program to encourage insurers to sell plans on the exchanges by redistributing the risk. From 2014 to 2016, the government collected money from insurers who profited, and then, in compliance with “shall pay” language in the section, paid insurers who lost money because they sold plans to this group.

The HHS only partially paid the unprofitable insurers, exhausting the fund of payments it received. It initially said it would make up the difference out of future payments, Kolber said. The HHS didn’t deny its obligation, he said.

But the HHS never made up for the insurers’ risk corridor losses, and the result was devastating. Many nonprofit and Consumer Operated and Oriented Plans went under. Others pulled back coverage or increased premiums.

Multiple insurers sued the government for the balance, saying they wouldn’t have taken on the risk if the government hadn’t promised to share it. Many gave up any hope they would ever see the money.

Implied Repeal

The U.S. Court of Appeals for the Federal Circuit held in 2018 that Section 1342 statutorily obligated the government to repay the insurers in full.

But post-enactment riders to appropriations bills in which Congress said the HHS couldn’t use any of its appropriated funds to pay the insurers superseded the statutory promise, the Federal Circuit said.

The high court, therefore, will consider if Congress can use appropriations tools to set aside or impliedly repeal statutory law, Keith said.

Congress can amend or repeal existing laws, Kolber said. Sometimes it’s not able to do so as a practical matter, so it uses the appropriations process to accomplish the same goal, he said.

The government argued the riders repealed its duty to pay the insurers, Kolber said. But all they did was withhold money to pay for the program, the insurers and their supporters said. The riders didn’t affect the statutory obligation, they said.

‘Dangerous Precedent?’

The second “big picture” question goes to the government’s credibility. If the government doesn’t have to pay the insurers despite the law’s “shall pay” directive, can it be counted on to live up to its promises in the future?

The high court would establish a dangerous precedent if it accepts the government’s argument, the insurers said. Namely, that no matter how clear the government’s promise, it doesn’t have to keep its word.

The government has a “fair argument” that executive agencies are limited by the funds Congress appropriates for them, Kolber said. Government contractors need to understand Congress could take away money allocated to pay them. That creates a “serious problem,” he said.

But that’s where the Judgment Fund comes in, Kolber said. Congress specifically created this fund to satisfy judgments against it, and the insurers are asking to be paid out of it, he said. Previously, Congress would have had to appropriate funds to pay any party that won a lawsuit against it.

No Money

The government also argued Congress never appropriated money for the risk corridor program. Lawmakers always intended the program to pay for itself, it said.

When the payments-in proved deficient, the government had no further payment obligation, it said. The justices may ask the government court to expand on whether it’s always true that the government doesn’t have to pay if the source of funds Congress identified runs dry, Kolber said.

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

The case is Maine Cmty. Health Options v. United States, U.S., No. 18-1023, argument scheduled 12/10/19.

To contact the reporter on this story: Mary Anne Pazanowski in Washington at mpazanowski@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Nicholas Datlowe at ndatlowe@bloomberglaw.com

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