SCOTUS to rule in favor of insurers?

[JamieDimonsBalls]

https://www.nytimes.com/2019/12/10/us/supreme-court-obamacare-insurance.html?smid=nytcore-ios-share

Not a lawyer and detest health insurers, but it doesn't seem like a winnable case for the Federal Government.

It seems like the only nuance here is the Federal Government’s ability to get out of a contract through a unique loophole.

This reads like a pretty standard derivative contract:

If premiums exceeded a company’s medical expenses, the insurer would be required to pay some of its profit to the government. But if premiums fell short of medical expenses, the insurer would be entitled to payments from the government.

 

[CGW-89]

https://www.nytimes.com/2019/12/10/us/supreme-court-obamacare-insurance.html?smid=nytcore-ios-share

Not a lawyer and detest health insurers, but it doesn't seem like a winnable case for the Federal Government.

It seems like the only nuance here is the Federal Government’s ability to get out of a contract through a unique loophole.

This reads like a pretty standard derivative contract:

If premiums exceeded a company’s medical expenses, the insurer would be required to pay some of its profit to the government. But if premiums fell short of medical expenses, the insurer would be entitled to payments from the government.

The Affordable Care Act was one of the reasons I got out of the health insurance industry, but i think the insurers in question are being disingenuous in their argument. When I was in the industry, it was clearly understood, at least at UHG, that the Risk Corridor program was a zero sum game. In short, insurance companies with less risky insureds would pay into the program and then those dollars would be allocated to the insurance companies with higher risk insureds. Now, I've been gone for over five years so things may have changed since then.

 

[JamieDimonsBalls]

The Affordable Care Act was one of the reasons I got out of the health insurance industry, but i think the insurers in question are being disingenuous in their argument. When I was in the industry, it was clearly understood, at least at UHG, that the Risk Corridor program was a zero sum game. In short, insurance companies with less risky insureds would pay into the program and then those dollars would be allocated to the insurance companies with higher risk insureds. Now, I've been gone for over five years so things may have changed since then.

But, isn't that precisely the issue? Too many took on higher risk insureds and the government is now bailing on its obligation (stated or implied - I assume the former, but didn't review the contracts) to reimburse to zero out the excess costs.

 

[CGW-89]

But, isn't that precisely the issue? Too many took on higher risk insureds and the government is now bailing on its obligation (stated or implied - I assume the former, but didn't review the contracts) to reimburse to zero out the excess costs.

Again, it's been five years since I was knee deep in the ACA. There were two components to the original reimbursement program. One was reinsurance and the other risk corridors. Reinsurance was funded through taxes on the insurance companies (which was passed on to the consumer), and was a temporary program. I believe it was set to expire in the three years. In theory, the government was the backstop on the reinsurance program and was at risk if excess losses were not covered by the amount of taxes collected. The risk corridor (RC) program was/is modeled after a similar type program that is in existence today in the Medicare Advantage world. It was backward looking and was intended to smooth results among carriers in the marketplace. RC was intended to be more of a "socialist" approach to share claim costs, since carriers couldn't underwrite and had to take all. Simplistic example, but if there were three carriers in a market and carrier 1 had losses of 150%, carrier 2 was at 130% and carrier 3 was 100%. Carrier 3 paid into the pool and carrier 1 and 2 received payments to flatten out their loss.

 

[JamieDimonsBalls]

Again, it's been five years since I was knee deep in the ACA. There were two components to the original reimbursement program. One was reinsurance and the other risk corridors. Reinsurance was funded through taxes on the insurance companies (which was passed on to the consumer), and was a temporary program. I believe it was set to expire in the three years. In theory, the government was the backstop on the reinsurance program and was at risk if excess losses were not covered by the amount of taxes collected. The risk corridor (RC) program was/is modeled after a similar type program that is in existence today in the Medicare Advantage world. It was backward looking and was intended to smooth results among carriers in the marketplace. RC was intended to be more of a "socialist" approach to share claim costs, since carriers couldn't underwrite and had to take all. Simplistic example, but if there were three carriers in a market and carrier 1 had losses of 150%, carrier 2 was at 130% and carrier 3 was 100%. Carrier 3 paid into the pool and carrier 1 and 2 received payments to flatten out their loss.

Right, but what happens if the losses outweighed the profits (and therefore payments into) the RCs? Isn't that essentially what happened?

 

[CGW-89]

Right, but what happens if the losses outweighed the profits (and therefore payments into) the RCs? Isn't that essentially what happened?

Yes, that is what happened, but RC was designed to distribute the losses (risks) more evenly among carriers, not guarantee a profit.

 

[JamieDimonsBalls]

Yes, that is what happened, but RC was designed to distribute the losses (risks) more evenly among carriers, not guarantee a profit.

But it sounds like it wasn't simply the insurers that were sharing in the profits and losses.

https://www.scotusblog.com/2019/12/...s-in-dispute-over-risk-corridor-compensation/

The dispute centers on the “risk corridors” that Congress created as part of the Affordable Care Act to balance out the risks that insurers faced from offering health insurance on the exchanges. Congress recognized that the insurers would have relatively little information about the kinds of costs that their customers would incur because many customers would not have previously had insurance. Section 1342 of the ACA set up a mechanism by which insurers would share both profits and losses for the first three years in which the exchanges operated: Insurers that collected premiums that exceeded their costs would have to make “payments in” to the government to share the benefits, while insurers whose costs exceeded the premiums they collected would receive “payments out” from the government to help compensate for their losses. But in 2014 and the years that followed, Congress limited the funding that would be available to compensate insurers for their losses, which grew into the billions.