AHIP, state AGs urge appeals court to rehear risk-corridor payment case

Affordable Care Act highlighted
Although the Affordable Care Act set up the structure for risk-corridor payments, a three-judge panel ruled that Congress had suspended the government's obligation to pay them. (Getty/Ellenmck)

Stakeholders across the health system are urging a federal U.S. Court of Appeals to revisit its ACA risk-corridor payment decision through a slew of new amicus briefs.

The briefs—including those filed on behalf of AHIP, attorneys general in 18 states, Blue Cross Blue Shield and the National Association of Insurance Commissioners—argue that the court's June decision will wreak havoc on ACA marketplaces if allowed to stand.

“The refusal to make risk-corridor payments frustrates the ACA’s goal of diversifying the health insurance marketplace and results in defaults on federal loans. If insurance companies fail, it reduces the availability of potential insurers who are willing to provide insurance in a manner that furthers the ACA’s overall goals,” attorneys from the state of Oregon wrote in a brief (PDF) that included 17 other states.

The Affordable Care Act set up risk corridors as an incentive for insurers to join the new marketplaces. Because these were untested markets, policymakers expected some degree of uncertainty regarding which insurers made out better than others—a level of randomness that would make insurers hesitant to join. The risk corridors aimed to level the playing field by transferring funds from insurers with extreme gains to those with extreme losses.

However, the June decision by the United States Court of Appeals for the Federal Circuit ruled that Congress has removed the obligation for the government to deliver on those payments. Moda Health and Land of Lincoln, two insurers who filed the original suit to release the payments, asked the court last month to revisit that decision, but the appeals court rarely grants such petitions.

RELATED: Insurers petition court to rehear risk-corridor case involving $12B in ACA payments

“The panel majority has given the Government an undeserved windfall on the backs of health insurers who, in good faith, relied on the Government’s assurances that it would share in the risk they were undertaking,” attorneys for Moda Health wrote in their appeal (PDF).

In its plea to the court, America's Health Insurance Plans (AHIP) argued the decision was unfair to insurers, and the precedent would make it difficult to rely on future promises from the federal government. 

"The panel majority’s holding calls into question years of precedent holding the government to its obligations, thereby casting doubt on whether private health care providers can rely upon the federal government as a fair business partner—a question of urgent and increasing importance given the government’s recent conduct in connection with other ACA programs," AHIP wrote in its amicus brief (PDF).

In separate briefs, Blue Cross Blue Shield (PDF) and the National Association of Insurance Commissioners (PDF) made similar arguments. NAIC noted that the government's failure to make risk corridor payments has "suppressed competition in the Exchanges, burdening consumers and regulators."

If the court declines to rehear the decision, Moda Health and Land of Lincoln can take their case to the Supreme Court. However, they face an uphill battle as most arguments in their favor depend on the original intent of the Patient Protection and Affordable Care Act, rather than Congress' appropriations decisions in the years following.

That tension was evident in Oregon's justification for a rehearing.

"Because Congress understood how significantly the ACA and state insurance marketplaces would be affected by a change to the risk-corridor payment methodology, Congress is unlikely to have implemented such changes implicitly by burying them in appropriations riders," the brief stated. "Indeed, Congress expressly considered and rejected stand-alone legislation to implement precisely the same 'new payment methodology' that the majority inferred from the appropriations riders."