The Supreme Court on Monday agreed to hear a challenge from health insurers who argue the federal government owes them hefty Obamacare payments, stoking the possibility the Trump administration could be forced to pay out billions of dollars for a law it’s tried to dismantle.
The insurers claim they are due money from an Obamacare program helping companies that attracted sick and expensive customers in the early years of the law’s insurance marketplaces. The justices’ decision to take the case means it will reconsider an earlier appellate court ruling that the federal government isn’t on the hook for the payments.
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The Supreme Court will consider combined cases from three small insurers, but its eventual ruling will serve as a precedent for dozens of other similar pending cases. Altogether, insurers believe they’re owed more than $12 billion.
This marks the fifth Obamacare-related case the Supreme Court has agreed to hear in almost a decade since the law’s passage, and it may soon hear another — a constitutional challenge brought by Republican-led states and supported by the Trump administration.
Unlike that lawsuit or previous challenges to Affordable Care Act’s individual mandate and subsidy scheme heard by the Supreme Court, the health insurer cases don’t directly threaten the law’s underpinnings. Nor do they address a deep partisan divide like two previous Supreme Court challenges over the requirement for employers to provide free birth control coverage under the ACA.
“This is not an ideological challenge to the ACA,” said Katie Keith, a Georgetown Law professor who tracks health care litigation. “This is more about previous Supreme Court precedent and whether the lower court got it right or not.“
However, a ruling for the insurers would represent a politically awkward defeat for a Trump administration that’s failed to rip out Obamacare, a priority for the president’s base.
The insurers’ case involves the Affordable Care Act’s risk corridors program, which was among the safeguards built into the law to protect insurers from big losses in the early years of the new insurance marketplaces, given the difficulty of predicting how sick and expensive their new customers would be. Insurers whose customers proved more expensive than expected would receive payments, while those that underestimated costs would pay into the program.
However, many more insurers ended up qualifying for assistance than having to pay into the program, which expired in 2016. But Republicans balked at spending taxpayer dollars to cover the program’s deficit — decrying it as a bailout for insurers — and blocked the federal government from making payments.
That contributed to skyrocketing premiums in the ACA’s fledgling marketplaces after they launched in 2014, and it also helped push many nonprofit insurers seeded with Obamacare funds into financial collapse.
The Supreme Court’s decision to take up the challenge likely won’t have a significant effect on the marketplaces. After several years of turbulence, most insurers are turning a profit, resulting in growing competition and relatively modest premium hikes and decreases this year. Early signs suggest a similar pattern for 2020 plans.
However, the court could soon wrestle with another Obamacare case that puts the law’s fate at stake. In December, a federal judge ruled that the elimination of the individual mandate penalty in the GOP tax cut rendered the entire health care law unconstitutional. An appeal of that controversial ruling, which most legal experts expect to be overturned, will be heard by the 5th U.S. Circuit Court of Appeals on July 9. The losing side is expected to ask the high court to review the case.
Insurers in 2016 filed the first lawsuits claiming the ACA guaranteed them payments from the risk corridor program, despite Congress’s later decision to block taxpayer dollars. The Obama administration, and later the Trump administration, has fought the insurers in court.
Lower courts split on the merits of the legal claims. Oregon-based Moda Health won a $200 million judgment, but the $70 million claim from the now-defunct Land of Lincoln Health was rejected. A divided appellate court last June ruled against the insurers in a combined case, finding that Congress clearly took action to prevent federal payouts to the program.
Maine Community Health Options is the third insurer that had appealed to the Supreme Court to take up the issue. The cases will be consolidated and scheduled for one hour of oral arguments.
Nicholas Bagley, a professor at University of Michigan Law School who has written extensively about the insurer lawsuits, said the Supreme Court’s decision to take the cases shows some justices have doubts about the lower court’s ruling. It takes at least four justices to agree on hearing a case.
Though the cases don’t address a larger central question about Obamacare, Bagley said they’re bound to revive political arguments over the law.
“Anytime the law touches the Affordable Care Act, these questions become white hot,” Bagley said. “I think we’re going to see yet again a major fight over the promises that the government made and the promises that the government broke, and reopening those old wounds is bound to stir up some feelings on both sides.