US Supreme Court leans towards insurers on $12bn Obamacare claims

In 2018, a US Court of Appeals ruled that the US Congress effectively repealed its obligation to pay the insurers.

U.S. Supreme Court justices pose for their group
Unlike other US Supreme Court cases involving Obamacare, this dispute concerns only payments to insurers and does not directly challenge the law itself [File: Jim Young/Reuters]

United States Supreme Court justices on Tuesday appeared sympathetic to claims made by health insurers seeking $12bn from the federal government under a programme set up by the Obamacare law aimed at encouraging them to offer medical coverage to previously uninsured Americans.

The justices considered a challenge by a group of insurers of a lower court’s ruling that Congress had suspended the government’s obligation to make such payments. The insurers have said that ruling constituted a “bait-and-switch” that would enable the government to withhold money the companies were promised.

The court’s four liberal justices, in addition to Chief Justice John Roberts and Justice Brett Kavanaugh, all asked questions indicating they are inclined to vote for the insurers.

“Why doesn’t the government have to pay its contracts just like everybody else?” said Justice Stephen Breyer.

Moda Health Plan Inc and other insurers sued to compel the Department of Health and Human Services (HHS) to make the payments. The programme in question was designed to help insurers recover from early losses they suffered after the 2010 passage of the Affordable Care Act (ACA) under Democratic former President Barack Obama.

The law, dubbed Obamacare, has enabled millions of Americans who previously had no medical coverage to obtain insurance, including those with pre-existing medical conditions.

Unlike other court cases involving Obamacare, this dispute before the justices concerns only payments to insurers and does not directly challenge the law itself.

Conservative Justice Samuel Alito seemed most supportive of the government.

“Has there ever been a case where this court has, in effect, required Congress to appropriate … billions of dollars for private businesses?” he asked the insurers’ lawyer, Paul Clement.

Other insurers involved in the case include Blue Cross and Blue Shield of North Carolina, Maine Community Health Options and Land of Lincoln Mutual Health Insurance Company.

If the Supreme Court sides with the insurers, it could result in a significant one-time cash infusion for major companies such as Humana Inc, Anthem Inc, and Centene Corp, according to a note by Evercore ISI. Shares of all three were up slightly on Tuesday.

Payments would have come through the law’s risk corridor programme designed to mitigate insurers’ risks from 2014 to 2016, when they sold coverage to previously uninsured people through exchanges established under the ACA.

Under the programme, insurers that paid out significantly less in claims on policies sold through the exchanges than they took in from premiums provided some of their gains to the government. Insurers that paid out more were entitled to government compensation for part of their losses.

Roberts questioned whether any of the insurers would have participated in the programme if the payments were not available.

“It’s a good business opportunity for them because the government promised to pay,” he said.

Republicans, who have opposed Obamacare from the outset and numerous times sought to repeal it in Congress, have called the risk  corridor programme a “bailout” for the insurance industry.

From 2015 through 2017, Congress each year passed appropriations bills that included language barring HHS from using general funds to pay the government’s risk corridor obligations.

The US Court of Appeals for the Federal Circuit ruled 2-1 in 2018 that Congress effectively repealed its obligation to pay the insurers.

Source: Reuters