(Reuters) - The U.S. Supreme Court on Monday agreed to decide whether insurers can seek $12 billion from the federal government under a program set up by the Obamacare law aimed at encouraging them to offer medical coverage to previously uninsured Americans.
The justices will hear an appeal by a group of insurers of a lower court’s ruling that Congress had suspended the government’s obligation to make such payments. The insurers have said that ruling, if allowed to stand, would let the government pull a “bait-and-switch” and withhold money the companies were promised.
Moda Inc unit Moda Health Plan Inc and other insurers that sued to try to compel the Department of Health and Human Services (HHS) to make the payments have said the government was supposed to help them recover from early losses they suffered after the 2010 passage of the Affordable Care Act under Democratic former President Barack Obama.
The law, dubbed Obamacare, has enabled millions of Americans who previously had not medical coverage to obtain insurance.
Other insurers involved in the case include Blue Cross and Blue Shield of North Carolina, Maine Community Health Options and Land of Lincoln Mutual Health Insurance Company.
If the Supreme Court sides with the insurers, it could result in a significant one-time cash infusion for major companies such as Humana Inc, Anthem Inc and Centene Corp, according to a note by Evercore ISI. The insurers had previously written off the value of the payments.
Payments would have come through the law’s so-called risk corridor program that was designed to mitigate insurers’ risks from 2014 to 2016 when they sold coverage to previously uninsured people who bought insurance on exchanges established under the Affordable Care Act.
Robert Gootee, chief executive of Moda Inc, said he was encouraged that the Supreme Court agreed to hear the case.
“We remain confident that the court will ultimately hold the government to its promise to pay those companies, including Moda, who answered the government’s call to provide access to affordable health care for the neediest of Americans,” Gootee said in a statement.
HHS declined to comment.
Under the risk corridor program, insurers that paid out significantly less in claims on policies sold through the exchanges than they took in from premiums provided some of their gains to the government. Insurers that paid out more were entitled to government compensation for part of their losses.
Republicans, who have opposed Obamacare from the outset and sought numerous times to repeal it in Congress, have called the risk-corridor program a “bailout” for the insurance industry.
In December 2014, Congress passed an appropriations bill for the 2015 fiscal year that included a rider barring HHS from using general funds to pay the government’s risk corridor obligations.
As a result, the government could compensate insurers only with the money it collected from insurance companies that paid less than they took in from premiums. Congress enacted identical riders for fiscal years 2016 and 2017.
Payments from insurers, though, could not fund all of the claimed risk corridor payments. In November 2017, HHS published statistics indicating that payments from insurers for the three-year period fell short of claimed payments by $12 billion.
The U.S. Court of Appeals for the Federal Circuit ruled 2-1 last year that Congress, in passing the appropriations riders, implicitly repealed its statutory obligation to pay the insurers. The insurers appealed, arguing that Supreme Court precedents require much more explicit legislative language to eliminate a previously adopted payment obligation.
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Reporting by Nate Raymond and Lawrence Hurley; Editing by Will Dunham
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