Judges Rule Insurers Not Owed Billions in ACA Risk-Corridor Funds

A panel of federal judges ruled 2-1 that insurers are not owed $12 billion in unpaid ACA risk-corridor payments.

The risk-corridor payments were meant to offset losses in the early years of the ACA when insurers took on the burden of risky patients with preexisting conditions. The panel of appellate judges ruled that because Congress passed a provision in 2014 requiring risk-corridor payments to be budget neutral, the federal government has no obligation to fully pay.

The current ruling is a part of two appeals cases by Moda Health and Land of Lincoln Health. Moda Health sued the federal government for $214 million in unpaid risk-corridor payments, while Land of Lincoln Health sued for $72.8 million. A federal judge previously ruled in Moda Health’s favor and the federal government appealed that decision.

The government currently has a $12.3 billion deficit in risk-corridor payments to insurers who participated in the ACA before the risk-corridor payment program expired in 2016. The program used a funding-formula to reimburse plans with higher than expected health care costs and required plans with lower costs to pay into the fund. In 2014, Congress tacked a rider onto the federal budget bill that required CMS to only pay out up to the amount it takes in from health plans—creating the massive deficit.

The majority of the judges ruled that the government does not have to pay because Congress made clear its intent to limit the program. The dissenting judge in the case, Judge Pauline Newman, argued that the budget riders were insufficient and did not remove the government’s obligation to pay.

Furthermore, Moda Health argued that not paying the funds was a breach of contract, because insurers entered into the high-risk marketplace with the understanding that the federal government would pay for high-risk patients. Additionally, Moda Health pointed to a recent request by the Trump Administration for $11.5 to fund the expired risk-corridor program as an acknowledgment of the federal government’s obligation to pay. The judges ruled that the 2018 budget request was not relevant to the case, and the HHS removed the request after it was highlighted by Moda Health.

—David Costill

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