Supreme Court Risk Corridor Ruling May Have Far-Reaching Impact

Supreme Court Risk Corridor Ruling May Have Far-Reaching Impact

Recently, the Supreme Court of the United States ruled 8-1 that the United States government owes various health insurers a total of 12 billion dollars in delayed payments from the Affordable Care Act’s (ACA) risk corridor program. Many other insurers are involved in similar lawsuits pending in lower courts, including a class action suit involving 116 insurers. The decision in Maine Community Health Options v. the United States will benefit all of these entities too, which may have a trickle-down impact on group health insurance coverage through fully-insured plans.

The Supreme Court’s decision will have far-reaching implications. It is the result of several consolidated lawsuits brought by three different insurers, including a plan that blames its collapse on not receiving promised federal risk corridor funds. Dozens of other similar cases are pending, and this decision may prompt additional legal action from different insurers with related claims. Payments will go to insurers who offered qualified health plans through the individual and small group exchange marketplaces during 2014-2016. Some of those issuers are out of business or in receivership now. Others no longer offer QHP plans. Still, they all qualify for payment.

For insurers that remain in business, one issue that remains unsolved presently is how risk corridor payments received this year will impact their medical loss ratios (MLR). Current MLR rules require that risk corridor payments count as insurer income in their year in which they are received. If HHS does not amend that rule based on the court decision, many individual and small group insurers may owe hefty MLR rebates to 2020 consumers. Neither the risk corridor cash infusion nor the limitations on elective care claims due to COVID-19 restrictions were ever factored into 2020 premium rates. Alternatively, HHS may allow insurers to attribute any risk-corridor judgment money received to their 2014-2016 MLRs, resulting in new rebate calculations. Another option would be for HHS to enable issuers to exempt their judgment payments from their 2020 MLR calculation. It remains to be seen if HHS will issue new MLR rules or sub-regulatory guidance to address the Supreme Court’s action.

If health insurers must apply any judgment funds to their MLR rebate calculations, either for the 2020 plan year or for past affected plan years, employers with fully-insured coverage could be affected.  Past rebate amounts or calculations might change, necessitating employer-plan action, or an employer group could get a more substantial than expected rebate for current plan year costs. All MLR rebate distributions come with compliance concerns for employer-sponsored groups, and we want to make sure that our clients don’t unexpectedly encounter any issues. So, if your group plan gets an MLR rebate check or communication either for the 2020 plan year or for prior plans years, please contact your Kistler Tiffany Benefits consultant right away.  It is possible over the year that you could get a communication from your 2020 carrier if you have fully insured coverage, or from a carrier that you worked with between 2014-2016.  If this happens, Kistler Tiffany will help you address any related MLR actions appropriately with your plan participants.  We will also be watching for additional federal guidance on this issue and will contact any affected clients as we learn of potential outcomes.

Many court-watchers also will speculate about what this decisive Supreme Court ruling means for other ongoing ACA-related litigation. Concerning the most prominent case challenging the entire ACA, Texas v. United States, this decision probably means little. Maine Community Health Options v. the United States involved a very limited part of the ACA and unambiguous statutory language. Texas v. United States concerns the individual mandate, which many viewed as the heart of the ACA’s health insurance reform provisions, the law’s lack of a severability clause, and the Court’s prior action to uphold the ACA and the individual mandate based on the congressional power of taxation. The stakes of that case are immeasurably higher, and so a wide-margin ruling when the Supreme Court considers Texas v. United States next year is much less likely.