Catalyst’s Jeff Myers weighs in on the SCOTUS 8-1 ruling of CMS owing billions to health insurers in risk corridor funding, discussing while it’s mandated by law, the risk corridor program isn’t well designed to begin with. Read the full article reprinted with permission from AISHealth.com below:
The Supreme Court’s near-unanimous decision on April 27 to award health insurers $12 billion in unpaid risk corridors funding was certainly a win for the industry, but it might not be as big of a windfall for insurers as it may seem, experts tell AIS Health.
The risk corridors program was part of the Affordable Care Act’s “three Rs” — alongside risk adjustment and reinsurance — which were meant to stabilize the individual market in the law’s early years. With risk corridors, the government shares in insurers’ losses and profits, so health plans with lower-than-expected claims paid into the program while plans with higher-than-expected claims received payment.
During its three-year existence, the risk corridors program took in far less than it paid out as many health insurers sustained financial losses. In dozens of lawsuits, including one class-action suit involving more than 100 insurers, plaintiffs claimed that CMS must make up the $12 billion shortfall. But the government resisted, saying a provision in the 2015 omnibus spending bill effectively blocks CMS from doing so. Split decisions in the lower courts resulted in one consolidated case, Maine Community Health Options v. United States, reaching the Supreme Court, where justices were won over by health plans’ arguments.
As Justice Sonia Sotomayor wrote for the 8-1 majority, the court’s holdings “reflect a principle as old as the Nation itself: The Government should honor its obligations.”
“I’ve always found it difficult to believe that the insurers didn’t have a good constitutional basis to demand payment,” Jeff Myers, senior vice president of reimbursement strategy and market access for Catalyst Health Care Consulting, tells AIS Health. In fact, “it boggles the mind that the appeals court could suggest that statutory law didn’t require the government to pay,” he adds.
Katie Keith, who attended the Supreme Court’s Dec. 10 hearing on the case, shares a similar view.
“My sense from oral argument is the justices seemed pretty sympathetic to the insurers’ arguments,” says Keith, research professor at Georgetown University’s Center on Health Insurance Reforms and principal at Keith Policy Solutions, LLC. “I surprised at 8-1, but I’m pretty much surprised by a vote of 8-1 on anything from this court,” Keith adds. “So that was sort of interesting and a very resounding win.”
“The federal government made a clear commitment in the interest of building stable markets and making coverage more affordable for individuals and small employers. Health insurance providers kept their commitments while incurring substantial losses,” Matt Eyles, president and CEO of America’s Health Insurance Plans, wrote in a statement regarding the ruling. “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.”
Added Margaret Murray, CEO of the Association for Community Affiliated Plans: “It’s absurd to ask health plans — or anyone else doing business with the United States government — to price in the notion that Congress might arbitrarily walk away from commitments it makes in Federal law. We’re relieved the Supreme Court agrees.”
Yet while the decision may be good news for the insurers that sued, Myers says he isn’t so sure the risk corridors program was set up very well in the first place.
“In essence, because the design wasn’t particularly well done, you’re going to have a lot of money transferred from the taxpayer — and frankly, plans that were offering copper plans and other well-managed plans — to plans that had lots of benefits and arguably took on more risk,” he says. “So I think ultimately, most of this money is going to go to the Blue Cross [and Blue Shield] plans, which have never been particularly financially efficient in the individual marketplace.”
Will This Jeopardize a Bailout?
Another possible concern is that the $12 billion judgment in some insurers’ favor will impact the industry’s ability to receive funding from the government to stem any losses related to the COVID-19 pandemic and stabilize the insurance market.
“I think the perception could hurt them,” Keith says. “It is a big number; $12 billion sounds like a lot.”
Yet she points out that the court’s ruling concerned payments from the ACA’s temporary risk corridors program from 2014 to 2016, so “it would be a mistake to think that all of this money is going towards companies that are offering coverage now. And it’s not going to uniformly benefit insurance companies in the individual market.
“So many of these companies are insolvent, they went out of business, and some of them who were more heavily involved in the individual market in the early days have either pulled out or pulled back,” Keith adds. What’s more, “you have some insurance companies that weren’t involved in the first years that are involved now, so they wouldn’t benefit from it.”
Ultimately, the $12 billion going to the insurers that sued the government “would be a very poor substitute for some kind of broader, individual market stabilization from Congress,” she says.
America’s Health Insurance Plans, alongside other major health care industry trade groups and the U.S. Chamber of Commerce, recently joined forces to ask Congress to hold a special enrollment period on HealthCare.gov and increase individual market subsidies, among other measures, to ensure Americans who have lost their jobs amid the current pandemic-linked economic contraction are able to continue to access health coverage.
MLRs Could Be Affected
When it comes to the current individual market, Keith says the one potential implication of the risk corridors ruling surrounds how it will affect insurers’ medical loss ratios (MLRs). Under the ACA, individual market insurers must spend at least 80% of their premium income on medical care, and they must issue rebates to members if the percentage dips below that.
HHS will probably have to issue guidance that outlines how the $12 billion judgement will affect MLRs, Keith says, as it’s not yet clear whether the funds will affect MLR rebate calculations for 2020. Already, insurers that participate in the individual, small-group and large-group markets are projected to issue a record high $2.7 billion in MLR rebates to their customers this year.
But Keith says it is clear that the risk corridors ruling doesn’t necessarily mean the Supreme Court will rule in favor of the ACA in a case (Texas v. U.S.) challenging the entirety of the law, which is slated for oral arguments later this year.
“I would be wary of looking at this as like a pro-ACA decision,” she says, pointing out that the case was less about ideology and more about statutory interpretation and appropriations law. “The way I think about this case is it happened to be about the ACA, but it could’ve been about any other issue.”
by Leslie Small