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Supreme Court Backs Insurers on $12 Billion in Obamacare Payments

Supreme Court Backs Insurers on $12 Billion in Obamacare Payments

(Bloomberg) -- The federal government must abide by a pledge to pay insurers $12 billion to cover some of the losses they incurred providing risky policies under the Affordable Care Act, the U.S. Supreme Court ruled.

The justices, voting 8-1, sided with a group of nonprofit insurance companies that sued after Congress refused to appropriate the money for the ACA’s “risk corridors” program for three years. The ruling doesn’t affect the ongoing operations of Obamacare.

The insurers accused the government of reneging on a promise that encouraged them to cover previously uninsured people, whose lack of historical medical data meant the companies couldn’t predict future costs. The 2010 health-care law said the government would cover part of the shortfall if claims ended up exceeding premiums.

“The government should honor its obligations,” Justice Sonia Sotomayor wrote for the court. She called that principle “as old as the nation itself” and pointed to a 1790 report in which Alexander Hamilton said states that keep their promises are “respected and trusted.”

Justice Samuel Alito dissented, saying it wasn’t clear Congress had given insurance companies the right to sue. He said the decision “has the effect of providing a massive bailout for insurance companies that took a calculated risk and lost.”

The Trump administration argued unsuccessfully during arguments in December that Congress implicitly overrode the Obamacare promise when it blocked payments in 2014, 2015 and 2016. The Supreme Court ruling overturned a federal appeals court decision that had backed the government.

Although most of the money will go to nonprofit insurers, Centene Corp., Humana Inc. and Aetna Inc. are also in line to benefit. “Investors probably weren’t surprised by the ruling given the questions asked by the justices during the December hearing,” said Paul Heldman, who analyzes health policy issues for investors at Heldman Simpson Partners.

The ruling will also bolster Molina Healthcare Inc. in a separate lawsuit, according to Katie Keith, a health-law professor at Georgetown University. Molina is suing over a separate type of Obamacare payment, known as cost-sharing reductions, which the Trump administration cut off in 2017.

Matt Eyles, president of America’s Health Insurance Plans, said in a statement, “We appreciate that today’s Supreme Court 8-1 decision ensures that the federal government honors the obligations it made for services the private sector already delivered.”

The case is Maine Community Health Options v. United States, 18-1023.

©2020 Bloomberg L.P.