Judge rules in favor of Moda Health in risk corridor suit

A federal judge ruled this week that the federal government owes the insurer Moda Health $214 million in payments from the Affordable Care Act’s risk corridor program.

Previously the government filed to dismiss Moda's suit for risk corridor payments it never received. But in his ruling (PDF) issued Thursday, U.S. Court of Federal Claims Judge Thomas Wheeler wrote that the government's risk corridor program made a “promise” of funds to insurers that it failed to fulfill.

"Whether under statute or contract, the court finds that the government made a promise in the risk corridors program that it has yet to fulfill," he wrote. "Today, the court directs the government to fulfill that promise."

RELATED: Blue Cross of Idaho latest to sue over risk corridor shortfall

Wheeler also noted that the insurer has an impact-in-fact contract with the program that prevents the government from withholding payments because Congress changed the funding rules a year after laying them out for participating payers.

“After all, to say to [Moda], ‘The joke is on you. You shouldn’t have trusted us,’ is hardly worthy of our great government,” his opinion said.

A number of insurers have filed suit against the government for owed risk corridor payments. Blue Cross Blue Shield of North Carolina is seeking more nearly $150 million in owed payments, and Blue Cross of Idaho sued the government for more nearly $80 million. Insurers have taken a hit from shortfalls in risk corridor payments after a spending bill passed in 2014 limited the program to paying out no more than it took in from insurers.

The risk corridor program was designed to encourage payers to participate in ACA marketplaces by distributing funds from thriving insurers to those that were struggling in the marketplaces, but conservatives pushed back against the regulations as a government bailout of insurance companies.

Congressional Republicans warned the Obama administration not to settle risk corridor lawsuits to keep the program budget neutral. However, Andy Slavitt, then the head of the Centers for Medicare & Medicaid Services, said the government has an obligation to make those payments.