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Appeals court rules against insurers seeking ACA risk corridor payments

A federal appeals court has ruled that the U.S. government does not owe health insurers billions of dollars in payments from an Affordable Care Act provision.

The U.S. Court of Appeals for the Federal Circuit in a 2-1 decision ruled against insurers Moda Health Plan Inc. and Land of Lincoln Mutual Health Insurance Co. who represented dozens of other companies that sought to recover $12 billion from the ACA risk corridor program.

"The circumstances of this legislation and subsequent regulation did not create a contract promising the full amount of risk corridors payments," Chief Judge Sharon Proust wrote in the majority opinion. "Accordingly, we hold that Moda has failed to state a viable claim for additional payments under the risk corridors program under either a statutory or contract theory."

In the early years of the ACA, the risk corridor program was a temporary program designed to limit how much money insurers could gain and lose by offering new, comprehensive insurance products to consumers. It was set up to allow insurers to tinker with benefits and premiums to get a sense of how the new markets would work, in order to price products properly.

In 2015, congressional Republicans limited how much money the Department of Health and Human Services could reimburse health insurers. That caused many managed care companies to try to recover funds in court. Moda Health won a ruling in a lower court that ordered the government to pay it $210 million, while Land of Lincoln lost its battle at the district court level in a bid to recover more than $75 million.

Judge Pauline Newman in her dissent said that the majority's decision "undermines the reliability of dealings with the government" because it allows the government to avoid previously incurred obligations by later declining to appropriate the proper funds.

The plaintiffs could still appeal the decision to the full appellate court or petition the U.S. Supreme Court to take it up.