Health Insurers Have “Strong Claim” to Billions in ACA Compensation

A lawsuit filed by health insurers has a “strong claim” to billions of dollars in compensation from the Affordable Care Act’s risk-corridor program, according to a recent perspective published in the New England Journal of Medicine. 

With this in mind, Nicholas Bagley, JD, professor of law at the University of Michigan, wrote that the Obama administration’s recent offer to open settlement negotiations with affected insurers is the best course of action to resolve the suit, despite contention from Congressional Republicans. 

“As with many disputes over health care reform, the partisan squabbling has elevated an obscure legal question to public attention,” Mr Bagley wrote. 

With the adoption of the Affordable Care Act (ACA), Congress created a temporary risk-corridor program to encourage more insurers to participate in health insurance exchanges, thereby increasing competition and lowering premiums. 

The program—which aimed to compensate insurers for large losses with appropriated funding and profits returned from well-performing risk-corridor participants—faced difficulties when Congress refused to fully fund the risk-corridor program in its 2015 and 2016 omnibus appropriations bills, Mr Bagley explained. In late 2015, HHS announced that the $362 million received from strong performers fell well short of the $2.87 billion the program owed, and by the end of summer 2016 only seven of the 23 cooperative health plans established using ACA loans were still in business. 

Along with fewer choices and higher premiums for exchange customers, these events have led to at least eight lawsuits from health insurers seeking promised risk-corridor payments. As these payments have been openly acknowledged by HHS as “obligations of the United States for which full payment is required,” the Obama administration announced it was open to settlement negotiations in September. 

According to Mr Bagley, Congressional Republicans are fighting the administration’s decision, arguing that the conditions of the appropriations statutes cancelled the government’s obligation to insurers. They also contend that the administration cannot settle the case using its pre-existing Judgement Fund without using capital appropriated by Congress. 

Congressional Republicans are incorrect on both of these claims, Mr Bagley wrote, thus providing a convincing legal case for compensation. Although it is possible for another Congress and president to eventually amend the executive branch’s Judgement Fund to prohibit payment, he noted that “Uncle Sam may have no choice but to pay up.” 

“With that upshot in mind, the Obama administration’s willingness to open settlement negotiations appears neither feckless nor unlawful. On the contrary, it is the responsible thing to do,” Mr Bagley concluded. —Dave Muoio