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Appeals Court Rejects Insurers Risk Corridors Claims

On Thursday June 14, 2018, the US Court of Appeals for the Federal Circuit ruled against two health plans seeking risk corridors payments from the federal government. A more detailed background on the program and pending litigation is available in my prior post hereThe risk corridors program was essentially a three-year program created to help stabilize premiums during the ACA’s initial implementation period. The program required profitable insurers to pay funds into the program and used these funds to subsidize insurers with higher medical claims. As noted in my previous post, Congress subsequently inserted riders in appropriations legislation which made the risk corridor program budget neutral—meaning the program would not pay out more money than it received. As a result, an estimated $12.3 billion in risk corridors receipts were never paid out to insurers.

Insurers had successfully convinced the lower court that the subsequent Congressional riders restricting the program as budget neutral did not vitiate the federal government’s statutory duty to make risk corridors payments in full, and that in the alternative, the risk corridors legislation created an implied-in-fact contract for full payment of the risk corridors payments. However, the Appeals Court rejected both arguments, holding that HHS has no obligation to make risk corridor payments to insurers under the ACA because those subsequent congressional riders “suspended the government’s obligation in each year of the program through intent,” and that the “[risk corridors] legislation and subsequent regulation did not create a contract promising the full amount of risk corridors payments.”

A copy of the relevant decision is available here. As noted in the last post, despite this decision, it is unlikely that the battle over the risk corridors will be over any time soon. In a future post, I will expand on the decision and discuss its implications.

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Xavier represents clients in the health care and life sciences fields on health care regulatory and fraud and abuse matters. He also handles Medicare and Medicaid reimbursement issues in transactions and business arrangements.