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  • January 14, 2020

    Risk Corridors and Promised Payments: Massive Government Bait and Switch?

    Three cases currently before the U.S. Supreme Court address whether the federal government is required to pay health insurers money under the risk corridors statute. Richelle Ladwig reviews the cases and its implications. “At stake is whether the government can be a trusted business partner for private entities,” she writes.

    Richelle A. Ladwig

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    Many health insurers and the federal government are waiting for the U.S. Supreme Court’s decision involving risk corridors. The issue is whether the federal government is required to pay health insurers money under the risk corridors statute.

    This case has implications far beyond even the $12 billion in dispute. At stake is whether the government can be a trusted business partner to pay private entities when that entity already performed its statutory obligations and is entitled to payment.

    This article provides background on the risk corridors statute and government actions that led to both a higher than expected amount of risk in the Health Insurance Marketplace (HIM) and minimal government payments owed to health insurers who participated in the HIM.

    Next, it briefly outlines the legal actions that ensued and the status of this case before the U.S. Supreme Court. Lastly, it discusses the implications of this case beyond risk corridors, and the affect it could have on anyone doing business with the federal government.


    The Patient Protection and Affordable Care Act (ACA) was signed into law March 23, 2010. The risk corridor was one of three health insurance premium stabilization programs included in the ACA.

    Richelle A. Ladwig Richelle A. Ladwig, U.W. 2008, is deputy general counsel, director of legal services with Quartz Health Solutions in Madison, where she practices in health, insurance, and corporate law.

    The purpose of this program was to protect against the financial impact of inaccurate rate setting in the early years of the HIM.1 The risk corridor statute provided a three-year (2014-16) temporary government program to help limit health insurers losses and gains as they implemented the ACA and offered Qualified Health Plans (QHP) on the HIM (QHP issuers).2

    Unknown to QHP issuers until it was announced in a letter to insurance commissioners on Nov. 14, 2013, the Center for Medicare & Medicaid Services (CMS) outlined that it would permit plans that were in effect as of Oct. 1, 2013 in the individual and small group markets to remain in effect. Those plans could continue to be ACA noncompliant even after many of ACA laws became effective Jan. 1, 2014, as it related to certain ACA provisions.3 This resulted in healthier individuals keeping their non-ACA compliant plans, while sicker individuals shopped for plans on the HIM.

    QHP issuers were not able to adjust their rates to account for the greater risk in the HIM, and losses were much greater than expected. They were relying on the risk corridor program to help offset some of the losses, however, that never came into fruition due to appropriation riders that Congress passed in late 2014.

    In 2014, two congress members asked the U.S. Government Accountability Office (GAO) what funds were available to make payments under the risk corridor statute.4 The GAO responded with two options:

    • amounts collected from QHP issuers who had excess profits per the statute (User Fee); and

    • funds from the CMS Program Management appropriation.5

    In response, Congress included appropriation rider language in 2014, 2015, and 2016, which clarified that none of the funds from CMS Program Management could be utilized to pay amounts owed to QHP issuers under the risk corridor statute.6 Because the U.S. Department of Health and Human Services (HHS) could only use the User Fees to pay QHP issuers and in general, losses far exceeded profits, the government payout to QHP issuers was minimal.

    The Cases

    Many QHP issuers sued the federal government in the United States Court of Federal Claims, which has national jurisdiction over money claims against the government. Lower courts held that, while the risk corridor is a money-mandating statute due to the statutory language “shall pay,” the government’s obligation to pay QHP issuers was nevertheless extinguished by appropriation riders enacted in 2014 and later years.7

    Three cases made its way up through the court system, and QHP issuers petitioned for writ of certiorari before the Supreme Court in 2019, arguing the lower courts holdings were inaccurate.

    This article focuses on these three cases, which are currently before the Supreme Court:

    • Maine Cmty. Health Options v. United States;

    • Moda Health Plan, Inc. v. United States; and

    • Land of Lincoln Mut. Health Ins. Co. v. United States.8

    The Arguments

    The three cases pose similar questions before the Supreme Court. The critical issue is whether enacting appropriation riders restricting government funding sources may retroactively alleviate the government’s obligation to pay under a money-mandating statute, even when parties (QHP issuers) already performed obligations under the statute.9

    At oral argument before the Supreme Court on Dec. 10, 2019, the Petitioners (QHP issuers) maintained that the government failed to keep its payment promise as outlined in the risk corridor statute.10

    Petitioners argued a “massive government bait-and-switch,” and that the risk corridor statute alone is a money-mandating statute regardless of any legislative appropriations.11 When the ACA passed in 2010, there was no indication that the government would not pay QHP issuers.12 When the government was unable to pay due to the appropriation rider, it meant there was either a breach of contract or a violation of the statute. The solution was for QHP issuers to bring the case before the Court of Claims.13

    Lastly, Petitioners argued that the lower courts were wrong when they went against previous precedent, which set a presumption against construing statutes to have a retroactive effect and a presumption against retroactivity.14

    The government-respondents argued that this case was correctly decided by the lower courts based on the Appropriations Clause of the Constitution, which states that “No Money shall be drawn from the Treasury but in Consequence of Appropriations made by Law … .”15

    This is further reinforced by the Antideficiency Act, which prohibits the government from making an expenditure in excess of the amount available by appropriation or fund, unless allowed by law.16 Absent an appropriation, there is no obligation to pay, and the rider suspended government payment obligations. To interpret Congress’ acts any other way would “impose unprecedented liability on the United States for billions of dollars.”17


    The summer of 2020 will unveil an exciting conclusion to the risk corridor saga at the Supreme Court.

    In the interim, there were some revealing comments during Oral Argument. The petitioners seemed to adequately answer the justices’ questions, while the justices appeared skeptical of the respondent’s argument that the risk corridor statute was not a contract.

    For example, Justice Stephan Breyer asked respondents how this differs from a contract, stating “How does this scenario differ from ‘My hat’s on a flagpole. If you bring it down, I’ll pay you $10. You bring it down. I owe you $10.’”18

    Another example was when Chief Justice John Roberts stated to respondents “[…] don’t you question that these insurance companies would not have participated in the risk corridor program but for the government’s promise to pay?”19

    We will know later this year if the Supreme Court agrees with the petitioners.

    Wider Implications

    There are wider implications to these decisions beyond these three cases. The precedent set by this case will impact other risk corridor cases in lower courts that are on hold, pending the outcome of the cases before the Supreme Court.

    Additionally, private business counts on the government when statutes require that it “shall pay.” Private businesses may be wary of doing business with the government in the future, for fear of nonpayment.

    If the lower court decisions are upheld, any private entity doing business with the federal government is on notice that, even with a money-mandating statute, the government may not be obligated to pay the private entities, even if the entity wouldn’t have done business with the government but for their promise to pay.

    This article was originally published on the State Bar of Wisconsin’s Health Law Blog. Visit the State Bar sections or the Health Law Section web pages to learn more about the benefits of section membership.

    The Health Law Section is offering free section membership to government attorneys in the health law practice area for the next fiscal year. For more information, please contact Section Coordinator Jane Corkery at


    1 HHS Notice of Benefits and Payment Parameters for 2015, 79 Fed. Reg. 13744, 13829 (March. 11, 2014).

    2 42 USC §18062.

    3 CMS Letter to Insurance Commissioners, Nov. 14, 2013.

    4 GAO Letter to Senator Sessions and Representative Upton re: Department of Health and Human Services -- Risk Corridors Program, Sept. 30, 2014.

    5 Id.

    6 Consolidated and Further Continuing Appropriations Act, 2015, Pub. L. No. 113-235, § 227, 128 Stat. 2491 (2014).

    7 See Moda Health Plan, 892 F.3d 1311 (Fed. Cir. 2018).

    8 Maine Cmty. Health Options v. United States, 133 Fed. Cl. 1 (2017), aff'd, 729 F. App'x 939 (Fed. Cir. 2018), cert. granted, 139 S. Ct. 2743, 204 L. Ed. 2d 1130 (2019); Moda Health Plan, Inc. v. United States, 892 F.3d 1311 (Fed. Cir. 2018), cert. granted, 139 S. Ct. 2743, 204 L. Ed. 2d 1130 (2019); and Land of Lincoln Mut. Health Ins. Co. v. United States, 892 F.3d 1184 (Fed. Cir. 2018), cert. granted, 139 S. Ct. 2744, 204 L. Ed. 2d 1130 (2019).

    9 Maine Cmty. Health Options v. United States, Petition for Writ of Certiorari at i (Feb. 4, 2019).

    10 Maine Cmty. Health Options v. United States, Oral Argument at 4:13-16 (Dec. 10, 2019).

    11 Id. at 12:2-16.

    12 Id. at 15:18-23.

    13 Id. at 18:8-22.

    14 Id. at 27:10-18.

    15 United States Constitution, Article 1, Section 9, Clause 7. Maine Cmty. Health Options, Oral Argument at 30:18.

    16 31 U.S.C. § 1341(a)(1)(A).

    17 Maine Cmty. Health Options, Oral Argument 31:13-16.

    18 Id. at 32:4-7.

    19 Id. at 37:24-38:1.

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