Health and Science

Obamacare insurers could face impossible task of collecting billions of dollars owed them by government

Lisa Lake | | Getty Images

They won $214 million in Obamacare money. Good luck collecting it.

A judge ordered the federal government Thursday to pay Oregon insurer Moda Health $214 million after failing to fully compensate the company for so-called risk corridor claims under Obamacare.

Other insurers that also sell Obamacare plans have current claims on $8 billion more related to the same program, and those claims could rise to as high as almost $15 billion once 2016 plan results are finalized.

So far, Moda and the other insurers have gotten less than $460 million under the risk corridor program.

But all Obamacare insurers, whether they win a court case or not, could face long or impossible odds in actually getting the rest of the money that they are owed.

That's because the Republican-led Congress, whose actions led to the insurers getting stiffed on that cash in the first place, also has the power to bar the government from paying the insurers any legal judgments related to the money.

"The courts can't order Congress to appropriate money if it declines to do so," wrote Michigan University law professor Nicholas Bagley on Friday in a blog post detailing that quandary for insurers.

Bagley also took a shot at President Donald Trump, an Obamacare foe, saying there's good reason to believe that the Republican Trump would sign into law a bill passed by Congress to prevent the government's "Judgment Fund" from being used to bar payments for court-ordered risk corridor claims.

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"Refusing to pay is a shabby way to treat insurers, which entered the [Obamacare] exchanges in reliance on the federal government's promises," Bagley wrote.

"Our president, however, has a track record of stiffing business partners. I wouldn't be surprised if he signed a law doing just that."

Moda Health is just one of 17 insurers who have sued the government in the U.S. Court of Federal Claims for failing to fully pay those insurers what they claim to be owed under Obamacare's risk corridor program.

Moda was the first insurer to win its case.

"After all, 'to say to [Moda], 'The joke is on you. You shouldn't have trusted us,' is hardly worthy of our great government," wrote Judge Thomas Wheeler in an order brushing aside the government's argument that it should pay Moda was was promised under the risk corridor system.

Land of Lincoln, an insurer that lost its case earlier before another judge, is appealing that ruling. An Obamacare co-op, Land of Lincoln, closed last year and announced plans to liquidate after suffering steep losses.

Bagley on Friday wrote that it's possible that the Supreme Court eventually will weigh in on the risk corridor payment dispute. But, again, even if the high court supports the insurers' claims, it cannot force Congress to cough up the cash.

Risk corridors are one of a trio of programs that the Affordable Care Act created to entice insurers to sell health plans on Obamacare marketplaces by limiting their financial risk.

The risk corridor system ran for three years, from 2014 plans through 2016 plans.

It has been credited with keeping insurance premiums significantly lower than they otherwise would have been in the first several years of Obamacare plans, because insurers expected cash to offset any losses they suffered as a results they suffered from under-pricing premiums.

Under the program, insurers that are profitable give a fraction of their profits to the government — which in turn dispenses that money proportionately to insurers whose plans are not profitable.

Because more plans lost money in Obamacare's first several years than earned profits, the risk corridor program did not have enough cash to fully pay the insurers that were unprofitable.

Hopes that the Obama administration may have had of keeping its promise to insurers under the program ran into a brick wall when Congress passed legislation barring risk corridor payments that were not "budget neutral," i.e. if they added to the federal budget deficit.

Because the administration did not have enough money from profitable insurers to fully pay money-losing insurers, it would have had to increase the deficit to meet its obligations.

So instead of fully paying the risk corridor money for 2014 plans, the government pro-rated those payments, giving eligible insurers a total of just $362 million. That was less than 13 percent of the $2.87 million the insurers had claimed.

Last year, federal health officials said that all risk corridor money it received from insurers for 2015 profitable plans would go toward insurers who were still owed money from 2014 losses, and that no 2015 plan losses would get risk corridor payments. Any 2016 plan payments would go toward 2014 plan losses, and then, if any money remains, toward 2015 plan losses.

But without extra funding from Congress, it's likely that insurers will see no payments for 2015 and 2016, and end up well short of what they were fully owed for 2014.

Not easy for Obamacare insurers to make money