Obamacare

Supreme Court Orders Government To Fund $12 Billion Obamacare Bailout

The ruling says health insurers are owed money that Congress never appropriated.

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A decade after Obamacare passed, the Supreme Court is still untangling the law's legislative messes.

Today, the high court ruled that the federal government owes health insurers roughly $12 billion for losses incurred under the law, thanks to a program known as risk corridors. 

When Obamacare's insurance exchanges first went online, they faced a problem: They were new. For insurers, anything novel represents a risk. And the way insurers typically offset that risk is through higher premiums.

Obamacare's architects wanted to stop insurers from setting premiums any higher than necessary. So they designed the risk corridor program as a mechanism to essentially socialize the risk—sharing it between insurers and the federal government. 

Under the program, insurers were given annual cost targets; if they spent substantially less, they would have to pay into a federally administered fund. If costs ran high, and they spent substantially more than the target amount, they would be paid out of the fund. 

In theory, the program would be revenue-neutral. That's how the Congressional Budget Office initially scored the program, and that's what the Centers for Medicare and Medicaid Services said repeatedly during the Obama administration. Taxpayer money would never come into play. 

But this raised a question: What would happen if enough of the participating insurers overshot their targets and were owed money from a fund that few or none had paid into? Complicating matters further was that no money had been appropriated to fund such payments. Indeed, from 2015 through 2017, Congress attached appropriations riders explicitly barring any federal money from being used to fund the program. Either health insurers paid in and it all balanced out, or they wouldn't get their money. 

As it happened, insurers overshot their targets and there wasn't enough money to cover roughly $12 billion in payments. These payments had been authorized by statute, but they had not been appropriated.  

The federal government declined to pay. Health insurers participating in the program took the government to court, resulting in Maine Community Health Options v. United States. And today, in an 8–1 vote, the Supreme Court declared that the government must pay the insurers. 

Looked at one way, this is a simple ruling that the government must pay what it owes. As Justice Sonia Sotomayor wrote in the majority opinion, "These holdings reflect a principle as old as the Nation itself: The Government should honor its obligations."

Fair enough. But what does it mean for the federal government to owe money that Congress, which under the Constitution holds the sole power of the purse, declined to appropriate? 

As Justice Samuel Alito wrote in a lone dissenting opinion, "The Court infers a private right of action that has the effect of providing a massive bailout for insurance companies that took a calculated risk and lost. These companies chose to participate in an Affordable Care Act program that they thought would be profitable." 

"Under the Court's decision," Alito also wrote, "billions of taxpayer dollars will be turned over to insurance companies that bet unsuccessfully on the success of the program in question. This money will have to be paid even though Congress has pointedly declined to appropriate money for that purpose."

A different way to look at this ruling, then, is that the Supreme Court is essentially ordering the federal government to appropriate funds to pay private businesses in order to offset their losses, creating an appropriation where none existed. 

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  1. How does the Court get around this: “No Money shall be drawn from the Treasury but in Consequence of Appropriations made by Law…” (Art. I(7), U. S. Constitution)

    1. OK, I’ll check the Syllabus of the opinion:

      “3. Petitioners properly relied on the Tucker Act to sue for damages
      in the Court of Federal Claims. Pp. 23–30.
      (a) The United States has waived its immunity for certain damages suits in the Court of Federal Claims through the Tucker Act. Because that Act does not create “substantive rights,” United States v.
      Navajo Nation, 556 U. S. 287, 290, a plaintiff must premise her damages action on “other sources of law,” like “statutes or contracts,” ibid.,
      provided those statutes “ ‘can fairly be interpreted as mandating compensation by the Federal Government for the damage sustained,’” United States v. White Mountain Apache Tribe, 537 U. S. 465, 472. The Act does, however, yield when the obligation-creating statute provides its own detailed remedies or when the Administrative Procedure Act provides an avenue for relief. Pp. 23–26.
      (b) Petitioners clear each hurdle: The Risk Corridors statute is
      fairly interpreted as mandating compensation for damages, and neither exception to the Tucker Act applies. Section 1342’s mandatory “‘shall pay’ language” falls comfortably within the class of statutes that permit recovery of money damages in the Court of Federal Claims. This finding is bolstered by §1342’s focus on compensating insurers for past conduct. And there is no separate remedial scheme supplanting the Court of Federal Claims’ power to adjudicate petitioners’ claims. See United States v. Bormes, 568 U. S. 6, 12. Nor does the Administrative Procedure Act bar petitioners’ Tucker Act suit. In contrast to Bowen v. Massachusetts, 487 U. S. 879, a Medicaid case where the State sued the HHS Secretary under the Administrative Procedure Act in district court, petitioners here seek not prospective, nonmonetary relief to clarify future obligations but specific sums already calculated, past due, and designed to compensate for completed labors. The Risk Corridors statute and Tucker Act allow them that remedy. And because the Risk Corridors program expired years ago, this litigation presents no special concern, as Bowen did, about managing a complex ongoing relationship or tracking ever-changing accounting sheets. Pp. 26–30.”

      Let me see if I can translate that into English: Taxpayers and bondholders are getting boned, but on the other hand, the federal budget is so big you won’t hardly notice.

      1. Exactly. A mere $12 *billion* is chicken feed at this point.

      2. The ‘Tucker Act’ didn’t ratify the constitution NOR did Obamacare (no matter how powerful the politicians think they are) — The original question still stands.

    2. They don’t get around it. The law specifies that money is to be drawn from the treasury to pay those debts. The government then refusing to appropriate money for that purpose isn’t really relevant. The government made a promise to pay for something each year for three years and then argued that because it conveniently forgot to put cash in its wallet those three years it is now clear of that debt, which is absurd.

      But none of it matters because money printer go BRRRRR

      1. Yep. The problem with Alito’s dissent is that it would allow the federal government to breach contracts with abandon.

        1. If the contract doesn’t say “as long as Congress appropriates the money” then that’s a problem with the contract.

          1. Try telling your credit card company that you don’t need to pay because you didn’t budget for it this month.

            1. A lot of people are yelling for debt forgiveness.

              1. > A lot of people are yelling for debt forgiveness.

                Has Donald Trump asked the insurance companies to pretty please let us keep the money?

        2. The problem with the majority opinion is that people really SHOULDN’T rely on contracts that aren’t accompanied by appropriations. They simply shouldn’t. Refusing to appropriate money to keep a nominal promise to spend from being real is a fairly routine thing in Washington.

          1. Really? So if you contract with a company to provide services, and then you provide the services, you’re a OK with the company not having to pay because the company never put it in the budget? Or the relevant department head decided he didn’t want to sign the purchase order? Or the treasurer decided he didn’t want to sign the check? Because this is analogous. The appropriations process is a budgeting and control mechanism only. And no, Congress refusing to appropriate money that is used in contractual arrangements is not normal. Congress routinely refuses to appropriate when making non-contractual promises, for example to voters.

            1. That’s one of the risks of signing an ILLEGAL contract. Obamacare is UN-Constitutional……………

    3. I suppose this is a “now let them enforce it” situation. SCOTUS has ruled that Congress has to appropriate the money, but they can’t actually force them to do so.

      1. As I understand it, Congress put money into another pocket, accessible to successful plaintiffs in claims actions. The question is whether these particular claimants can get their hands in that pocket.

        1. And how much money is in that pocket.

        2. Let us all remember that the lawyers union fully and exclusively supports democratic politicians.
          So now the insurance companies have to sue to get the money, and the lawyers get their piece of the pie, and donate a piece of their piece to democrats.
          So it’s all good.

      2. “How many divisions does the (court) have?”

      3. My exact thought too.

    4. BECAUSE REASONS.

      That about sums it up.

    5. The other way to say it is “When Congress compels an executive agency to make a promise or sign a contract, the US government is bound to honor that contract unless a subsequent act of Congress explicitly reneges on the promise.” Failure to appropriate money is not sufficiently explicit to cancel the debt.

      Alito is just wrong when he says that the insurance companies took a bet that the business would be profitable. The insurance companies took a bet that the government would honor the “shall pay” language in the bill when the business was inevitably non-profitable.

  2. Just so we’re all clear, Obamacare is Trump’s fault.

    1. Let’s all agree that it’s Rubio’s fault.

      1. Actually it is McCain’s fault. His dying gift to a formerly free Republic.

  3. I would like to know to what degree the insurance company loses were the result of state failures to implement Medicaid expansion. Failure to use the Medicaid expansion likely expanded the pool of low income people applying for insurance under the ACA. I don’t know that this added to insurance company loses but I would like to see it investigated. The ACA was not perfect but it was a plan and the failure to implement that plan has in other ways lead to more cost than expected.

    1. “The ACA was not perfect but it was a plan.”

      Charles Ponzi’s scheme was not perfect but it was a plan.

      1. The Soviet Union had a plan every 5 years!

      2. Interesting comment but it does not answer my question.

        1. Because your question was stupid and based on an assertion with no cite.

          1. First I would note the number of replies to my statement that the ACA was a plan. I would also note that while the Republicans told us they had a better plan to replace the ACA, they were never able to find that plan once they controlled Congress and the Presidency. The ACA was also based on conservative ideas of a market place system (now you can send me replies about how conservatives never had any part, by the paper trail is there and history will validate my statement.)
            As for my question, I don’t think question require citations, they require answers. I you have none just say that.

    2. “…The ACA was not perfect but it was a plan…”

      Do you read what you post?!
      Fucking idiot…

    3. “The ACA was not perfect but it was a plan and the failure to implement that plan has in other ways lead to more cost than expected.”
      Than expected by you, anyway. I think most people who didn’t support it knew it would be a clusterf(*&$ and rolled their eyes at the budget neutral projections.

      1. You can say fuck here Lenin.

  4. This is a separation of powers issue. The Courts do not have the power to appropriate money from the treasury. Only Congress has that. Congress needs to tell the court to fuck off. There is no way to enforce this order if Congress refuses to appropriate the funds. And that is what needs to happen. It is long past time for our robed overlords in the Court to be put in their place and made to understand the limits of their authority.

    1. OK, it seems the Court found a roundabout way to say Congress *did* appropriate the money.

      Congress passed the Tucker Act allowing people with certain money claims against the feds to sue in the Court of Claims. The Supremes said the Tucker Act allows plaintiffs to collect damages for not getting paid under the insurance corridor thing.

      Now my understanding is that for the Court of Claims to have jurisdiction it must have access to some money, appropriated for that purpose by Congress, which will be used to pay the claims on which the plaintiffs prevail on their Court of Claims lawsuit. An initial attempt by Congress to make Court of Claims opinions purely advisory was rejected because an Art. III court can’t give advisory opinions. Hence, I would have to assume there’s a line item in a Congressional budget for paying claims, and the Court of Claims will now dip into that money.

      I could always be wrong. This is, after all, the Internet.

      1. A current senate can not bound a future senate. They can not appropriate money from a future Congress. The Tucker act should be unconstitutional.

        1. ^^^THIS as well as Obamacare!!! What makes it confusing is it’s ALL being passed against the Constitution. The opinion of the court should have been “no funds” for a bill that is clearly UN-Constitutional to a 1st Grader but a liberal court ignored the Constitution in the first place. That’s not an excuse to keep ignoring the Constitution.

    2. They should issue garnishments against any and all government lawyers that drafted the policy and their bosses (Obama, the HHS Sec,…). Let them pay it back since they promised it without Constitutional authority.

      1. ^^ BINGO!!!! —– +1000000000000.. It’s due time someone started enforcing the Supreme Law around here…

    3. I’m not following your thinking. Courts don’t have the power to make Congress do anything. SCOTUS is simply ruling that there is a valid contractual obligation.

  5. “Obamacare’s architects wanted to stop insurers from setting premiums any higher than necessary.”

    Ostensibly the goal was to force insurers into a fixed price market zero sum game, watch them go bankrupt, step in to “save” the day, and call it a night with a new NHS for the USA. In other words complete and totalitarian socialism only Stalin could love.

    Except most of the left and liberals and even moderates (aka RINOs) wanted it too. Which is why you should not vote for those fuckers. They are all hardcore Marxist Stalinists no matter what they say. They want power and this latest ploy to shut down the economy so they can further control it is evidence.

  6. On the other hand, now social security has no problems.
    I got me a contract, and by God, they will pay full benefits until I die.
    A lawsuit each month? No worries, the lawyers will set up a plan to automatically file each and every month, get my benefits, and have the feds pay the lawyers bill.

  7. Will they accept IOUs? Cause that’s all we got.

  8. The Congress did authorize the expenditure in the ACA Law. the government is obligated by Congressional Law. I find it amusing that a libertarian oriented discussion that claims to require strict adherence to the rule of law would claim that the government can default on its obligations due to a technicality (authorization and appropriation).

    Don’t contractual agreements mean anything? Just because libertarians do not agree with the policy does not give them or anyone else the right to argue that the government should not pay what it legally owes. But of course consistency is the hallmark of principled libertarians, not most of the ones who just want to use government powers to enforce the policy they agree with.

    1. You’re missing the appropriations part of the discussion.

      1. Okay, here’s a great idea to solve the Social Security funding problem.

        When the SS Fund run out of money Conges should just not appropriate any fund to pay benefits. Problem solved!

        Oh, millions of Americans thought that because they paid into the system and the law was ruled Constitutional they should get their benefits. Ha Ha, jokes on them.

        1. You think it’s funny, but most young people KNOW Social Security won’t be around for them when they retire, even if they are paying into it.

          So that’s exactly what will happen… to the ordinary person.

          1. It will be around as it has its own revenue stream. It just might not be as much.

            Since that’s a large number of voters, it will be heaved onto the deficit.

            Since the “lockbox” was already spent, that will have to be heaved onto the debt, too.

            If all this printing of money leads to inflation, wrecking the savings of millions, that can be heaved onto the debt, too.

        2. Congress never had the authority —- THAT IS THE PROBLEM… When Ed McMahon promises you $10M in a mailer do you think that is reliable too?

        3. The SC ruled Plessy v Ferguson was ok, so forgive me if I don’t trust what the Nazgul say is the supreme law.

      2. That part is irrelevant, per the SCOTUS decision, as it should be. The appropriations process is a budgeting and control process, and it happens after most statutes are enacted. A law created a contractual obligation, and that obligation isn’t negated simply because Congress decided they didn’t want to put the expenditure in an appropriations bill. In fact, Congress can spend without an appropriations bill.

    2. “Don’t contractual agreements mean anything?”

      Sure, when they are not born from fraud. The American taxpayer has been unquestionably and grossly defrauded through lies and corruption. Another hallmark of a principled libertarian is not to comply with a principle that violates the NAP. The same legislation that put a gun to the heads of those that did not “buy” the insurance through an imposed fine, I mean, tax.

      As a healthcare policy, surely Obamacare would be considered to be the truest living and breathing document. And as such, one could envision the original signers of the act having never envisioned $12 billion in debt unless of course 0bamcare stated that the insurance company profits shall not be infringed. Check the emanations and penumbras and get back to me.

      From: https://www.theatlantic.com/politics/archive/2012/03/obamacare-and-the-living-breathing-constitution/255145/
      “As Obama points out elsewhere, “The Founders and ratifiers themselves disagreed profoundly, vehemently, on the meaning of their masterpiece.” Who is to say, given their disagreements and the aforementioned developments they never anticipated, that being true to the core principles they established doesn’t require not only a writ suspending the Affordable Care Act, but new recognition that whether or not an American chooses to contract for health care (or chooses to sell a kidney) should fall under the general right to privacy that emanates from the penumbras of the Bill of Rights?

  9. Chief Justice Shitstain Roberts was willing to argue that insurers did not meet the definition of an insurer, because they assumed zero risk and were more akin to a payment center with zero incentive to mitigate costs, but declined when he wasn’t going to alter the outcome at 8-1 and punishing the corruption that guaranteed the payments might cost him some party invites.

  10. No worries this should be a resolved issue soon. Republicans will release their repeal and replace plan any day now…

  11. so I’m paying for those goddam Liberty Mutual emu commercials one way or the other

  12. For the final time where in the Constitution is judicial review for the SC? It isn’t there…States make the final call on what is Constitutional..the worst thing to occur to this country is Jefferson being in France when the Statists took control in Phily..

    1. Dual federalism (our Republic) has Federal and State courts and each responsible for the aforementioned. Federal had NO authority to enact Obamacare. It was indeed left to the States or most likely never to exist in the first place.

  13. “A different way to look at this ruling, then, is that the Supreme Court is essentially ordering the federal government to appropriate funds to pay private businesses in order to offset their losses, creating an appropriation where none existed. ”

    this is exactly what happens anywhere in the federal government when a government official directs an action that is not backed up by contract or law. case law is unambiguous and unanimous that the government remains liable for these improperly executed actions. it’s the first thing that they warn everyone in the government who is taking on the role of overseeing contract tasks (a Contracting Officer’s Representative, or Contracting Officer’s Technical Representative, depending on the authorities and the department). that’s what happened here. it was extremely unlikely ever to go any other way.

  14. This is the policy where Obama promised free shit to the insurance companies but congress (even when democrats have controlled the House) never actually gave HHS the money to do it, right? Didn’t Obama pay them anyways, congressional appropriations be damned?

  15. Biden was right! Obamacare was a big fucked up deal!

  16. Hannah T. ANderson paycheck was for 1500 dollars… All i did was simple online work from comfort at home for 3-4 hours/day that I got from this agency I discovered over the internet and they paid me for it 95 bucks every hour… More Details

  17. The judgment fund is an appropriation by Congress to pay money to satisfy court money judgments against the United States. This decision will result in a court money judgment against the United States. So if money from the judgment fund is used to pay it, the money will indeed have been appropriated by Congress.

  18. Here is information on the Judgment Fund, which is indeed appropriated by Congress:

    https://fas.org/sgp/crs/misc/R42835.pdf

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