Supreme Court Orders Government To Fund $12 Billion Obamacare Bailout
The ruling says health insurers are owed money that Congress never appropriated.
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.