Justices rightly sided with health insurers
By JON HEALEY | Los Angeles Times | Published: April 28, 2020
Looks like health insurers will get their “bailout” after all.
The Supreme Court ruled Monday that Congress muffed the effort, led by Sen. Marco Rubio, R-Fla., and Rep. Tim Griffin, R-Ark., to deny insurers the money Congress promised to pay them if they wound up shouldering an unexpected amount of risk in the fledgling Affordable Care Act insurance exchanges. Rubio famously labeled the law’s “risk corridors” arrangement a bailout, even though it cut both ways: For the first three years of the new exchanges, insurers whose customers were disproportionately healthy had to pay the government their excess earnings, while those whose customers needed a disproportionate amount of treatment were entitled to recover some of their losses.
You might not find health insurers to be a very sympathetic plaintiff. But what Rubio and company did here really is outrageous, and it’s gratifying to see the justices push back (albeit for reasons that seem kinda technical).
The point behind the risk corridors was to encourage insurers to take part in the state exchanges that the ACA set up. The exchanges sought to make it easier for the roughly 20 million Americans not covered by employer health benefits or public insurance programs to buy coverage, in part by offering subsidies that held down premiums. But the exchanges also represented a leap into the void for insurers, because they had to offer a policy to anyone who wanted one, regardless of the person’s prior conditions, and couldn’t charge sick people more than they charged healthy ones.
Until insurers had a couple of years’ worth of experience in the exchanges, setting premiums involved a lot more guesswork than usual. That was especially true for the first open enrollment period in late 2013, and insurers counted on temporary provisions like the risk corridors to help them survive the transition.
But as an industry, insurers underestimated just how much care their new customers would need, while also fighting for market share by underpricing some of their competitors. That was a good thing for consumers, by the way, because the ACA required policies to be more comprehensive, and thus more expensive, than the coverage people had been buying previously. As a result, far more companies paid out excessive amounts in claims than collected excessive amounts in premiums. In the exchanges’ first year — 2014 — “profitable plans owed the Government $362 million, while the Government owed unprofitable plans $2.87 billion,” Justice Sonia Sotomayor wrote for the court’s majority.
Instead of covering the $2.5 billion difference, however, Congress inserted language into an annual spending bill for fiscal 2015 that barred the government from spending any money on risk-corridor payments — a rider that Rubio took credit for the following year in his campaign for president. That, folks, is a bait and switch of the first order. Similar riders were inserted the following two years, sticking insurers with about $9.5 billion in additional losses.
Those losses proved fatal to some of the new approaches to health insurance that the ACA inspired, to the detriment of us all. As The Washington Post reported in October 2015, “Nearly a third of the innovative health insurance plans created under the Affordable Care Act will be out of business at the end of 2015, following announcements Friday that plans in Oregon and Colorado are folding.”
The court ruled in favor of the four insurers that brought claims against the United States not because what Congress had done was unfair or wrong, but because it hadn’t stopped the risk-corridor payments the right way. And that’s not surprising; Republicans didn’t have the votes to change the Affordable Care Act (or “defund Obamacare” broadly, as Texas Sen. Ted Cruz demonstrated in 2013), so they used the leverage they had in the appropriations process to disable various pieces of it through the back door.
The risk-corridors program is one example of that; another is the failure to reimburse insurers for the discounts they were required to give very low income customers for out-of-pocket costs. That hasn’t ended well either; the U.S. Court of Federal Claims has ruled in favor of multiple insurers’ claims that Congress could not negate the government’s obligation to pay them the reimbursements required by law simply by failing to appropriate money for them.
Jon Healey is the Los Angeles Times’ deputy editorial page editor.