Court: Federal government doesn’t owe insurers Obamacare payments

The federal government doesn’t have to pay health insurers money they claim they’re owed from an Obamacare program, a federal appellate court ruled Thursday morning in a case with billions of dollars at stake.

A divided three-judge panel rejected claims from two Obamacare insurers that the federal government was required to make good on payments from a program meant to protect insurers who attracted customers who were sicker and more expensive than anticipated.

The two insurers were seeking hundreds of millions of dollars in payments from Obamacare’s risk corridors program, and at least three dozen other insurers have filed similar lawsuits. In all, insurers say they’re owed more than $12 billion from the risk corridors program.

The court, siding with the Trump administration, said that the federal government didn’t have to make the payments because Congress took action requiring the program to be budget neutral.

“Congress clearly indicated its intent the majority opinion read. “It asked GAO what funding would be available to make risk corridors payments, and it cut off the sole source of funding identified beyond payments in. It did so in each of the three years of the program’s existence.”

The decision is likely to set a precedent for the other pending cases. The insurers can appeal the ruling to the U.S. Supreme Court, raising the prospect that the high court could again weigh in on an Obamacare case.

Lower courts had split on the merits of insurers’ claims. Moda Health, an Oregon-based insurer, prevailed in its lawsuit, and the U.S. Court of Federal Claims ordered the federal government to pay more than $200 million. But the Illinois-based Land of Lincoln’s case seeking more than $70 million was rejected by the lower court.

The risk corridor program was one of three Obamacare programs offering financial protection to insurers in the law’s new marketplaces. Insurers earning more than expected were required to pay into the program, while those losing big were expected to receive payments.

However, the marketplaces performed worse than expected in the first few years, meaning more insurers sought payments. During the program’s first year, there were only enough funds to make good on 12.6 percent of payments owed to insurers.

The insurers said the federal government was required to use taxpayer dollars to make up the funding shortfall, but Republicans decried the request as a bailout. Congress passed legislation banning the federal government from making payments to insurers, prompting them to file lawsuits to recover the payments.

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