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Supreme Court Rules in Favor of Health Insurers Under Affordable Care Act’s Risk Corridor Program

The United States Supreme Court ruled in an 8-1 decision Monday in favor of four health insurers seeking hundreds of millions of dollars from the federal government related to the Affordable Care Act’s “risk corridor” program, reversing a lower court’s decision that Congress had suspended the government’s obligation to make such payments. Collectively, the decision was a major victory for health insurers, as the total deficit incurred by the government under the risk corridor program is more than $12 billion.

The risk corridor program was intended to be a financial incentive that Congress offered insurers to stabilize premiums and encourage participation in the individual and small group health insurance markets after the adoption of the Affordable Care Act.  The risk corridor program limited both profits and losses for insurance companies that offered plans in the individual and small group markets by requiring certain profits from these markets to be remitted to the Department of Health and Human Services, which in turn would give money to plans that sustained losses in these markets. The government did collect all of the profits that were owed under the risk corridor program, but only paid out a small fraction of the amounts owed to insurers that sustained losses. The risk corridor program closed in 2016 after three years, with the government ultimately not making more than $12 billion in contemplated risk corridor payments to insurers that had sustained losses.

The Supreme Court agreed with insurers that said the Federal Circuit’s ruling if allowed to stand, would have let the government pull a “bait-and-switch” and withhold money the companies were promised.  “We conclude that §1342 of the Affordable Care Act established a money-mandating obligation, that Congress did not repeal this obligation, and that petitioners may sue the Government for damages in the Court of Federal Claims,” Justice Sonia Sotomayor wrote in the court’s opinion.  “The government should honor its obligations,” Sotomayor wrote.

The majority held that the health plans’ suits validly invoked the Tucker Act, under which the government waives sovereign immunity, giving the health plans a cause of action to sue under the Tucker Act.  “Petitioners clear each hurdle: The risk corridors statute is fairly interpreted as mandating compensation for damages, and neither exception to the Tucker Act applies,” the Court said.

The Supreme Court’s decision makes it clear that health insurers who experienced losses, and were entitled to payments under the risk corridor program, could sue the federal government in the Court of Federal Claims for money owed under the program.

© Copyright 2021 Squire Patton Boggs (US) LLPNational Law Review, Volume X, Number 118
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Kimberly J. Donovan Litigation Attorney Squire Patton Boggs Miami, FL
Partner

Kimberly Donovan is an experienced complex commercial litigator who routinely litigates contract, commercial and complex business disputes, including putative class actions and high-stake claims seeking hundreds of millions of dollars in alleged damages.

While her niche is healthcare litigation, she has represented and strategically advised public and private entities and individuals in a variety of industries, including insurance, real estate development, and construction. She has also represented individuals in trust and estate litigation.

Kimberly frequently represents...

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Doug Anderson Insurance & Regulatory Compliance Attorney Squire Patton Boggs Columbus, OH
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Doug Anderson provides counsel on insurance law and regulatory compliance to global, national and regional insurance companies, trade associations, healthcare systems and businesses across all of the healthcare, life and property and casualty segments of the insurance industry.

A former regulator, Doug provides insight and perspective in assisting insurance companies, businesses and health plans achieve their business goals and objectives in a wide variety of matters, including:

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Benjamin Beaton Litigation Attorney Squire Patton Boggs Cincinnati, OH
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Benjamin Beaton is co-chair of the Appellate & Supreme Court Practice. He handles complex appeals, regulatory disputes and law-intensive trial proceedings. Ben has authored more than a dozen briefs at the US Supreme Court, where he previously served as a law clerk. He has drafted dozens more in the federal courts of appeal and state supreme courts, and regularly confers with trial and in-house counsel regarding appellate and motions strategy. Chambers has noted the firm’s “well-resourced appellate team, with notable experience in disputes heard before the Sixth Circuit.” The...

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John Bunch Healthcare Attorney Squire Patton Boggs Cincinnati, OH
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John Bunch leverages his prior experience serving as Associate General Counsel at a leading non-profit managed healthcare organization to counsel health insurance companies, hospital systems and physician groups on a broad range of issues.

John’s practice focuses on regulatory, compliance, and transactional matters in healthcare involving Health Maintenance Organizations, hospitals, Medicare, Medicaid, and the Health Insurance Marketplace. Specifically, John’s in-house experience includes acting as legal counsel for the development and implementation of the HMO’s first Medicare...

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