WASHINGTON (CN) — A lawyer for insurers that paid into the so-called risk corridor of the federal health care law told the Supreme Court on Tuesday that the government had engaged in a bait and switch with $12 billion on the line.
The program was meant to prevent insurers from drastically raising their premiums in the first three years the Affordable Care and Patient Protection Act, pooling money from profitable insurance providers to help out insurers that had higher-than-expected costs.
When the money in the pool dried up, however, the federal government was left on the hook for billions. In 2014, Congress included a revenue-neutral provision in the budget that year that meant it could only make payments to insurers using money that came into the fund. The Centers for Medicare and Medicaid Services in turn announced it would only pay back 12.6% of what insurers claimed under the program.
This prompted a string of lawsuits that the Supreme Court dove into Tuesday, consolidating appeals from Maine Community Health Options, Modo Health Plan and Land of Lincoln Mutual Health.
“The fact that the government can’t cut the check to pay its obligation means there’s either a breach of contract or a violation of the statute,” Paul Clement, an attorney for the insurers with Kirkland & Ellis, said this morning at oral arguments.
Justice Samuel Alito asked Clement if the issue of repayment could be solved by taking funds from another account. Clement said that was impossible as the HHS secretary had said a payout could not happen without violating the Anti-Deficiency Act, which prevents the government from issuing funds in excess of the amount available to appropriate.
But what the government cannot do, Clement continued, is try to make its commitment go away by deciding not to pay insurers through appropriations.
Justice Stephen Breyer compared the government’s obligation to that of a contract, asking Deputy U.S. Solicitor General Edwin Kneedler to distinguish the government’s argument from a hypothetical where he offered someone $10 to retrieve a hat stuck on a flagpole, and then refused to pay that person.
“I guess they could pass a statute and say we won’t pay our contract, OK? Then you have to follow the statute, unless the court sets it aside, but they didn’t say that,” Breyer said. “They just said: don’t pay it out of this fund. That’s common.”
Kneedler insisted, however, that there is fundamental difference between the example and the case since here there is no contract at issue. Precedent from Lebron v. National Railroad Passenger Corp. holds that statutes - like the congressional appropriation of funds - were made not to establish private contractual rights, Kneedler added.
Justice Brett Kavanaugh interjected with a question about congressional statutes worded like contracts.
“So is every congressional promise to pay, therefore, subject to an implicit subject to appropriations implicit subject to appropriations caveat?” Kavanaugh asked.
“I believe by and large that that is correct, yes,” Kneedler said.
Continuing this idea, Breyer said he thought Kneedler had two arguments related to governmental contracts, or their obligation to pay individuals, if that language was in legislation. Either they were always obligated to pay individuals when a statute explicitly stated they were, or they never were, he said.
“What is the line that distinguishes those instances where the government says, we shall pay you, Mr. Private Citizen, if you do X,” Breyer said. “He does X, but the government does not have to pay him. What is the line?”
Kneedler replied: “When Congress wants to undertake that sort of obligation, it does it through contracts. It does it by authorizing an agency to enter into contracts, which then forms a bilateral promise and performance back to the government.”