Next risk corridor ruling could be turning point for insurers

Gavel and flag in courtroom
Health insurers have filed a slew of lawsuits claiming they were wrongfully denied payments from the risk corridor program that the Obama administration promised them. (Getty/AlexStar)

Though so far the courts have split on whether the federal government owes health insurers back payments from the risk corridor program, the next ruling could turn the tide in the plaintiffs’ favor.

The court decision in question would decide the fate of two separate lawsuits—one brought by Oregon-based Moda Health and the other from Land of Lincoln Mutual Health Insurance Company. A federal judge has sided with Moda in its claim that the government owes it $214 million in risk corridor payments, but dismissed Land of Lincoln’s suit on its merits.

Both cases, which have been appealed, will now be considered together by a three-judge panel, Politico reports. It’s unclear when a final decision is expected, but briefs are expected to be filed in September for the combined cases.

The two lawsuits are among a slew of other complaints filed by health insurers claiming they were wrongfully denied payments from the risk corridor program that the Obama administration promised them.

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The risk corridor program—which collects funds from more-successful individual market insurers and pays funds to less-successful ones—has experienced considerable shortfalls since many insurers underestimated their enrollees’ claims costs. Those shortfalls proved a fatal blow to many startup, nonprofit insurers known as consumer-operated and oriented plans, which were created under the Affordable Care Act.

Congressional Republicans, meanwhile, have ensured that the program remains budget neutral, meaning taxpayer money can’t be used to fill in the gap left by too few insurers paying into the program.

If the panel of judges decides in favor of Moda and Land of Lincoln, judges could rely on that precedent and award back payments to other insurers, Nicholas Bagley, a professor at the University of Michigan Law School, told Politico. Plus, even more health plans could file suits, or join Health Republican of Oregon’s class-action suit. Ultimately, the Supreme Court may be the one to decide the issue.

A ruling has been made in one other risk corridor case—brought by Blue Cross Blue Shield of North Carolina—with a federal judge deciding in April that the insurer’s claims were premature.