Insurers may hold strong claim to billions in funds from feds


wHealth insurers may actually have a strong claim to recover money they are owed from the Affordable Care Act's risk corridor program.

Two questions are vital to comprehend insurers' allegations that they are owed billions to compensate for losses taken on ACA exchange plans, according to a recent post in the New England Journal of Medicine.

First, do payers have legal entitlement to recover payments from the risk corridor program? And secondly, if insurers do in fact have legitimate grounds for recourse, does the law grant the Obama administration the authority to pay legal settlements to insurers?

The details of the ACA offer relatively simple solutions to both questions, writes Nicholas Bagley, J.D.

In regard to the first question, since the healthcare law promised risk corridor payments to insurers with poor exchange performance, this created a legal entitlement that Bagley argues is enforceable in court.

The risk corridor program has paid out only a fraction of what it owes some insurers, sparking lawsuits from insurers including Highmark. Earlier this month, the Obama administration filed motions to dismiss two lawsuits brought by insurers to recoup risk corridor payments, though it has also indicated it might be willing to settle with some insurers that have sued.

Congressional Republicans recently filed an amicus brief arguing that because the program must be budget neutral, therefore payers have no right to risk corridor payments “in excess of receipts” from profitable health plans. The lawmakers' argument is off the mark, says Bagley, as the “mere failure to appropriate sufficient funds” does not change the scope of insurers’ entitlements.

“The promise that the ACA made has not been undone,” he writes.

On the second question, the Judgement Fund--a permanent appropriations coffer established by the Treasury Department for awards against the U.S. government--is unavailable as a source for settling risk corridor lawsuits only under the circumstances that Congress designates a different source of funds to pay awards for legal settlements, which it has not yet done, Bagely writes.

He concludes that payers have a solid claim to billions of dollars from the U.S. government, but litigation uncertainty muddies the picture of whether insurers will actually get paid.