Justices grapple with multibillion-dollar ObamaCare case

A divided Supreme Court on Tuesday grappled with a multibillion-dollar lawsuit over ObamaCare payments that health insurance companies say they were promised by the federal government.

At issue are financial incentives in ObamaCare that Congress used to encourage insurers to participate in the early years of the Affordable Care Act’s (ACA) health care marketplaces. Congress, though, later sharply curtailed those payments through the appropriations process, sparking a legal challenge from health insurers.

The justices appeared torn over whether to force the federal government to reimburse companies the $12 billion they lost in the marketplaces, or if the insurers had fair warning the repayment program could be reduced by Congress exercising its power of the purse.

Justice Brett Kavanaugh, a Trump appointee, put his finger on the dilemma at the heart of the case, laying out the wide-reaching implications for future partnerships between the federal government and the private sector, as well as potential burdens on the legislative process. 

“If we were to rule for you, everyone will be on notice going forward, private parties and Congress itself, that ‘shall pay’ doesn’t obligate actual payments,” he said. “If we rule against you, Congress also will be on notice going forward that it needs to include ‘subject to appropriations’ kind of language in any mandatory statute.”

Justice Elena Kagan, an Obama appointee, seemed wary of the government’s argument that the funding program in question, known as “risk corridors,” could legally bind insurance companies, but not Congress.

Under the risk corridor program, the government agreed to reimburse — or “pay out” — certain expenses borne by insurers whose costs were higher than expected. At the same time, insurers with lower-than-expected costs were required to furnish a portion of their profits — or “pay in” — to a risk corridor fund. 

Kagan, addressing the deputy solicitor general, who argued on behalf of the United States, seemed puzzled that the risk corridor payment language could obligate the companies, but not the government, suggesting a kind of double standard.

“So this is one where the ‘shall pay in’ is obligatory but the ‘shall pay out’ on the part of the government is not obligatory?” she asked, adding: “What kind of a statute is that?”

Justice Stephen Breyer, a Clinton appointee, pressed the government’s attorney as to why the court should find Congress had not entered into a classic contract, in which the government had said, “If you do X, we’ll pay you Y.” He noted that an individual government employee can be authorized to do so. 

“What policy could that rule serve?” Breyer asked. “What policy, constitutional or otherwise, would be served by a rule that says a [federal employee] can make the United States pay the money, but the Congress of the United States, House and Senate, signed by the President, cannot?”

Chief Justice John Roberts, on the other hand, asked the attorney for the insurance companies about the constitutional implications of ruling against the government, noting that the Constitution’s Appropriations Clause gives Congress the final authority to decide how public funds are used.  

Roberts, a George W. Bush appointee, also asked pointedly why the insurance companies did not ask Congress to include a specific appropriation for the risk corridor program. 

“You make a case at some length about the reliance of the insurance companies, they were basically seduced into this program,” Roberts said. 

“But they have good lawyers and the Constitution says no money shall come out of the Treasury except pursuant to an appropriations clause,” he continued. “I would have thought at some point they would have sat down and said, ‘Well, why don’t we insist upon an appropriations provision before we put ourselves on the hook for $12 billion?’”

When Congress passed the ACA in 2010, they made it illegal to deny coverage or charge higher premiums for people with preexisting conditions or others who could potentially be costly to insure.

This made it difficult for providers to know how much to charge in premiums to cover their expenses. To offset market uncertainty, Congress established the risk corridor program and several other financial cushions for insurers who agreed to participate in the new individual and small group markets. 

The program was designed to cover the first three years of the government exchanges, from 2014 to 2016, under a reimbursement formula laid out in the ACA.

Starting in 2015, the Republican-led Congress passed measures in appropriations bills that altered the repayment scheme, which they painted as a taxpayer funded bailout for insurers.

GOP lawmakers limited the available funds only to what was paid into the risk corridor fund by relatively profitable insurance companies. In effect, that meant Congress would not appropriate new funds to reimburse the insurers, as the industry expected.

In his opening remarks to the justices, the attorney for the insurance companies, Paul Clement, called the change a “bait and switch.” 

“This case involves a massive government bait and switch and the fundamental question of whether the government has to keep its word after its money-mandating promises have induced reliance,” he said.

Justice Samuel Alito, a George W. Bush appointee, pressed Clement about why his clients had a legal cause of action. He also wondered if the remedy the companies sought was something the justices had ever granted before.

“Has there ever been a case where this court has, in effect, required Congress to appropriate, through the Judgment Fund or in any other way, billions of dollars for private businesses?” Alito asked.

Tuesday’s oral arguments marked the fifth time the justices have weighed in on ObamaCare. While this time the future of the law was not at stake, the case was still closely watched by health care and business groups.

The fate of the law, though, could be decided in another case working its way through the courts. In that case, which involves a challenge to the law from 18 red state attorneys general, Judge Reed O’Connor, a federal judge in Texas appointed by George W. Bush, found the entire law unconstitutional in 2018. An appeals court is expected to rule in the case shortly.

Updated at 2:28 p.m.